Countrywide - No bottom yet

Yesterday Countrywide (CFC) was downgraded from Buy to Sell by a Merrill Lynch analyst, citing liquidity concerns. As early as last Friday he had reiterated his Buy rating in a research note, stating that the news appears to "sensationalize" the company's liquidity problems.

At least a few people questioned the timing of the downgrade and the abrupt reversal, as the Buy rating had already stood through a 50% decline. Some people even questioned whether the sell rating could actually signal the capitulation everyone has been waiting for and possibly mark a "near-term bottom" for Countrywide. There's some conventional wisdom that by the time analysts are comfortable slapping a sell rating on a stock, the worst news is probably already reflected in the stock price.

Unfortunately that was not the case this time. This morning Countrywide provided more bad news and found room for a new bottom. The company tapped its credit lines for $11.5 billion to supplement its liquidity position. Shares of Countrywide were recently down more than 10% in early trading.