Visteon (VC)

Company

VC 1-year chart VC 1-year chart

"Visteon Corporation is a leading global automotive supplier that designs, engineers and manufactures innovative climate, interior, electronic and lighting products for vehicle manufacturers, and also provides a range of products and services to aftermarket customers. With corporate offices in Van Buren Township, Mich. (U.S.); Shanghai, China; and Kerpen, Germany; the company has facilities in 26 countries and employs approximately 45,000 people." (company website)

VC 6-month chart
VC 6-month chart

Sell short

A few days ago I covered an earlier short position in VC when news that a hedge fund was increasing its stake in the company. As it turned out, the boost that gave the stock was very short-lived. I tried to short VC again yesterday, but in Wall Street's massive sell-off, my asking price was too high, beaten by all the people fleeing the market.

  • Price momentum (PPO) — falling drastically
  • Relative strength (RSI) — now very weak
  • Trend (ADX) — very strong, and selling pressure (-DI) is way above buying pressure (+DI)
  • Volume — above-average volumes for past week

Based on technical analysis, MarketEdge calls VC an "avoid" in a "weak downward trend," noting that it is "not a short candidate." I think they're wrong.

Update. Pardus keeps buying up shares of VC and a comparable French company, urging them to "explore alternatives," one of which includes a buyout of VC by the French company. VC earnings are due out before the market opens tomorrow; I'm hoping for another nasty surprise to drive prices down so I can cover at a profit.

Buy to cover

gain Bottom line
7%

For several days now, I've had an open order to cover at $6.20, a few cents above the recent 52-week low. This morning, the order finally executed.

My concerns with holding onto my short position were (1) that it had gotten so far below the trend line that a rebound seemed likely and (2) Pardus hedge fund kept buying up more and more of the stock, pulling the price back up.

Although I'm getting better at shorts, the psychology of a short position is still hard to get my mind around. I seem to have a much harder time holding a short position than a long position. With a short position, there is theoretically no limit to how much money you could lose, since there's no limit to how high a price could go, but that doesn't seem like an adequate explanation, since the odds of such a jump — especially for a company in the auto industry — seem long, indeed.