Commonwealth Bank of Australia (ASX: CBA) shares are back in the green in afternoon trade on Thursday.
At the time of writing, shares in the S&P/ASX 200 Index (ASX: XJO) bank stock are swapping hands for $134.45 apiece after closing yesterday at $134.19.
That sees CommBank stock up 0.19% today and 34.9% higher in the past 12 months. And that's without factoring in the $4.65 a share in fully franked dividends CBA paid over the year.
But, as you may be able to discern from the chart above, CBA shares have come under some selling pressure since the market close on 20 September, sliding 6.7%.
The recent headwinds blew out of China after the government revealed new stimulus measures to boost the nation's sluggish growth. Those measures include a 0.20% reduction in the seven-day repo rate, a 0.50% cut to interest rates on existing mortgages, and a 0.50% cut to Chinese banks' reserve ratio requirements.
Now, that's not directly bad for Aussie banks.
But CBA and the other big bank stocks took a hit as ASX 200 investors rotated out of bank stocks and into the big mining stocks amid surging iron ore and copper prices.
Which brings us to…
Has the time come to short CBA shares?
Regal Partners chief investment officer Phil King is sticking to shorting CBA shares. However, his reasons don't involve recent or pending Chinese stimulus measures.
As The Australian Financial Review reports, King labelled CommBank stock today as "the biggest bubble in Australian banks."
King acknowledged that numerous analysts have been forecasting a big share price fall pending for Australia's biggest bank. And that a lot of traders have lost a lot of money betting against the ongoing rally.
"It has hurt a lot of people. I think people have been trying to short the stock all the way from $60 up," he said.
The contrarian trader added, "When a lot of other people give up shorting something, you know that might be the best time to do it."
With CommBank's earnings weakening amid the bank's already pricey valuation compared to global and Aussie peers, King said shorting CBA shares "will be right eventually".
CBA trades on a price-to-earnings (P/E) ratio of approximately 23.7 times.
"What really gives me conviction on the trade at the moment is that many people are scared to short and also that earnings are starting to crack," King said.
