ABK Watch

The bottom has dropped out of the bond insurer Ambac Financial Group Inc. (ABK), with the stock trading today at about 10% below Friday's close. The decline came on reports Friday that credit default swaps insured by Ambac are worth 20 cents on the dollar.

	trend	adx	psar	pps	macd	macd trend	sto	sto trend
ABK $1.03

At 1:05 p.m. Eastern

The price so far today has traversed 13.7% high to low.

The news surprise wiped out bull signs that had shown up in the technicals beginning about a week earlier, illustrating yet again the limits of technical analysis.

Person's Proprietary Signal had moved to bull phase on May 28; it switched to bear today. The macd remained above zero for a third day, but its continuation in the green is doubtful. The parabolic sar remained in bull phase, but for how long? The fast stochastic, having touched overbought territory on June 2, was declining swiftly in a bearish sign.

And for the savvy trader, of course, an ABK negative news surprise should come as no surprise at all. The company is one of the walking wounded from the collapse of capitalist finance in 2007/2008. It was trading for $96.10 in May 2007. Now it's a penny stock.

The price drop took ABK below the 78.6% Fibonacci retracement level ($1.13) for the first time since June 1. the next lowest level, a 100% retracement, is at 51¢.

Reversal Levels

• $1.34, +30.1% (swing high)
• $1.17, +13.6% (20-day moving average)
• $1.13, +9.7% (Fib 78.6%)
• $1.03 <== You are here.
• $0.83, -19.4% (swing low)
• $0.51, -50.5% (Fib 100%)

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The Great Reflation: How Investors Can Profit From the New World of Money
OK. The credit bubble burst. Housing, burst. Shockwaves reverberated. Markets collapsed. What lies ahead as we remerge from the wreckage.

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Abbreviations:

• psar - Parabolic Stop and Reverse
• adx - Average Directional Index
• pps - Person's Proprietary Signal
• ma20 - 20-day moving average
• macd - Moving Average Convergence-Divergence
• sto - Fast Stochastic

About the glance: The colors indicate the state of each signal.

• trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
• adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
• psar, pps, macd: green for bull mode, red for bear
• sto: green for overbought, red for oversold, yellow for the neutral zone.

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Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.