Sunday, January 30, 2011

Trouble in Egypt may reveal market direction.

A couple of things I'd like to address in this post. The recent instability in Egypt surely has revealed some market direction to a number of ETFs and commodities. There are a few I would like to focus on in particular. In a nutshell these are; Oil prices (OIL), The US Dollar Index, and the Egypt ETF (EGPT).
Oil, now trading around $90 a barrel has a potential to reach $100 a barrel and beyond if unrest in the middle east continues.

Time to buy bullish oil ETFs is now! Seriously!

For instance the OIL ETF has surged to 4.83% (see chart below), and will trade even further as more unrest in the middle east is on the horizon.
The OIL ETF on the chart below;

Second, the USD index. Investors are returning to the safe haven of the US Dollar, trading around 78 points now this index is a bargain! For cautious investors like myself, take out an bullish options position (call option) on this index with an expiration of no more then 2 months.
If you are trading Forex, a bearish position on the EUR/USD wouldn't be unwise. This pair could pull back very fast if turmoil in Egypt keeps up.
Here's what the USD index looks like right now (this time I put the RSI behind the index to indicate the undersold condition of this index);

Here's another one for you if you're interested in Egypt if it was trading like a stock: the Egypt ETF (EGPT).
This one is certainly on a crash course if you ask me! I recommend to keep a close eye on the news coming out of Egypt, but so far it's not looking too good! A 'throw off the cliff' situation is exactly what happened here; take a look at the chart below.

With such heavy volatility and an RSI indicating such a tremendously low point (one I've never seen before in an ETF like this) it might be a good idea to be bullish on this one. The reason I say that is the last strong candle of the chart above indicating a reverse trend. This is pure fundamental analysis at this point. If the opposition leader in Egypt gets into power and the current president Muhammad Hosni Sayyid Mubarak is out, this ETF can trade much, if not alot higher.
All these trade recommendations above are what I like to call 'high probability trades', which means that it's highly likely these 'predictions' will follow through because of the social, fundamental economic and environmental circumstances.
Keep in mind, Oil prices, the USD index and the Egypt ETF

All bullish.

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