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Day five: trading QBE

QBE continues to show huge volatility, with the stock pushing to $10.64 on the open, only to fall 5.3% to $10.08. 

Trading QBE is for the brave, but the bulls will be hoping that we start seeing more positive price action, although we will need to see the stock stabilise. Stabilisation or consolidation should be taken as a positive step and provide QBE the necessary platform to progress.

Fundamentally the stock is now relatively cheap on 9.8X 2014 earnings, which is a reasonable discount to the five year average of 11x. The question is whether the earnings part of the equation is actually accurate, and for me the jury is still out here. On a more technical basis, key support stands at $9.88 (the January 2012 low) and a break of this level could be very important for the short-term traders who have bought the stock over the last few days.

Pre-market we did see ratings agency S&P put QBE on a negative credit outlook, and as flagged on Monday a downgrade was one of the key concerns the market had. It’s important to understand that its rating has not been downgraded yet, but the chances have increased markedly.

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