Short Washington Mutual Inc. (WM) on Market Weakness

            Today was a very weak day for financials as Lehman led a number of Financials and the S&P 500 down in early afternoon trading. The biggest new 52 week lows were almost entirely bank stocks. Wachovia, Bank Of America, Washington Mutual, Regions Financial, Fifth Third Bank and Keycorp all made new lows. Washington Mutual looks the weakest to me of the bunch.

            Washington Mutual (WM) didn’t collapse the way Lehman Brothers has fallen the last two days but after removing one its board members, fell 2.78% on the day. Analysts have marked down their estimates for the current quarter from a loss of 0.25 cents to a loss of 0.87 cents in the past 90 days. For the current year, analysts are looking for a loss of $2.92 for the bank where three months ago they were expecting a loss of only 0.92 cents.

            The stock is down 80% over the past year and has a short position of 18% of the float. The bank stocks could experience a rally and a stock with this much of a short position could be squeezed higher on a big rally day. But with the market struggling, the DOW in a new correction, and financials showing additional weakness, I think you can short Washington Mutual for a short term gain.