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Cliff Wachtel
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Cliff Wachtel, CPA, is currently the Director of Market Research, New Media and Training for Caesartrade.com, a fast growing forex and CFD broker. He covers a variety of topics including global market drivers, forex, currency hedged and diversified income investing, and is currently working on a... More
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  • MARCH 7-11 TOP NEWS TRADING OPPORTUNITIES & STRATEGIES: FOREX, STOCKS, COMMODITIES 0 comments
    Mar 7, 2011 2:17 PM | about stocks: UUP, UDN, FXA, FXB, FXC, FXD, FXE, EUO, FXF, FXEN, FXY, JYF, AUNZ, CYB, GLD, CNY, USO, DUG, DBV, ICI, CEW, SLV, OIL, SPY, SDS, RSW, BXDC, SPXU, SH, QQQ, DIA, EWC, EWA, TLT, XHB, ITM, ERO, IGOV, VGK, TBT, GSG, DBC, CORN, ICN, SZR, BZF, GRU, DAX, FRC, DB, SAN, USL, BNO
     Top Short Term Trading Opportunities & Strategies for Binary Options and Traditional Spot Market Traders

    There are a number of important news events this week that could create some VERY worthwhile opportunities for news trading, particularly the kind of hourly, intraday or multi-day short term risk-controlled speculation preferred by  binary options traders.

    These events include:

    • Ongoing developments in the MENA region that affect oil producing nations and thus oil production
    • The Bank Of England Rate Statement Thursday
    • The US Retail Sales Report Friday
    • The EU Economic Summit (as it relates to latest plans to resolve the EU sovereign debt and banking crisis

    Before we review the week ahead’s best short term trade opportunities and how to play them, here’s a quick review of a simple short term trading strategy that we posted earlier.

    A Review Of A Simple Short Term News Trading Strategy

    The following approach applies to trading news events for both intra-day, daily, and multi-day traders, whether the trend is up or down. Because it is simple it is relatively easy to apply, and puts the odds of correctly gauging the trend  further in your favor.

    That is critical for any kind of short term trading.

    It’s even more important for binary options traders, because correctly forecasting the trend is really the only thing you must do right most of the time in order to be profitable. With binary options, there is no complex risk management and exit planning, as opposed to traditional retail forex, stock index and commodity trading vehicles.

    The following is a quick review of the strategy we posted earlier here.

     

     

    1.     Watch Risk Appetite Barometers 2.     Monitor Trends For Shorter and Longer Time Frames 3.     Use Trend Indicators To Decide If There Is A Strong, Tradable Trend

    Here are just two of the more popular ones. There are many more

    Combine 1 and 2 Standard Deviation Bollinger Bands

    a)      Setup And Settings

    b)      Interpretation

    4.     Moving Average Crossovers

    If you are not already familiar with any of the above, we suggest that you review the full article (not long) via the above link.

    Here are the most promising news trading opportunity for the week.

     

    Oil Production Related MENA News

    MENA region news insofar as it may affect oil production is likely to continue to dominate markets again. Unrest continued to spread to other oil producers last week, with rumors of Saudi crackdown coming, and a ban on all protests, as well as Saudi tanks moving to Bahrain and protests in Oman. NB 40% of world’s oil passes though gulf. Any news that suggests production cuts is likely to hit most markets hard, while any good news could by itself send markets rallying.

    How To Trade News Of More Unrest Threatening Oil Production  

    Further news of unrest in oil producing nations will pressure risk assets lower.

    • Forex: Short risk currency pairs like the AUDCHF, AUDUSD, EURCHF, and EURJPY. Those trading these forex trends via forex binary options, buy puts on these.
    • Commodities: Long oil, gold, and silver. Those trading these trends via commodity binary options, buy calls on these.
    • Stocks And Stock Indexes: To trade the downtrends in the above pairs:
      • Buy the related ETFs for the safe haven currencies:
      • The USD: UUP
      • The JPY: FXY, JYF
      • The CHF: FXF
      • Buy The Short ETFs for the risk currencies. These go up as the given currency drops.
      • To short the Euro: EUO, DRR
      • Short global stock indexes like the S&P 500, Nikkei, or FTSE 100 and their key component stocks directly or via related ETFs like SPY, EWJ, FEZ, FDD, EZU, or EWU.
    • Stock and Stock Index Binary Options Traders: Buy puts on stocks and indexes, especially those more closely tied to MENA oil production like Italian oil producer ENI.

    NB: Those trading the longer weekly or monthly expiration times should pay special attention to support and resistance areas on the daily charts. Try to buy the puts mentioned above when the given pair has just broken below a support level or bounced lower off of a resistance point that held up. Try to buy the calls after the given asset has bounced higher off of a support level or broken above a resistance area.

     

    How To Trade News Of Easing Unrest and Stabilizing Oil Production  

     

    News that suggests an easing of tensions will likely send oil lower and other risk assets like stock indexes or higher yielding currencies higher, so just do the opposite. For example binary option traders would buy calls instead of puts for forex and stock index binary options, and puts instead of calls on oil, gold, and silver binary options.

     

    Economic Calendar Is Light, With Most Key Scheduled Events Loaded Into Thursday And Friday

     

    BoE Rate Statement To Update GBP Rate Hike Expectations

    Like the EUR the GBP has had support from both rising risk appetite and rate hike expectations. Rising risk appetite is on hold for now until oil output stabilizes, so that leaves rate expectations to keep the GBP up.

    How To Trade

    If markets interpret the remarks as dovish (anti-rate increase) that means the GBP is heading lower because lower rates reduce demand for a currency. Stocks prosper with low rates, so UK stocks and indexes would likely move higher.

    • Forex
      • Short the primary GBP pairs like the GBPUSD, EURGBP, and GBPJPY.
      • Forex binary option traders buy puts on these pairs
    • Stocks and Indexes
      • Go long on these or their related ETFs like Barclays Bank (NYSE:BCS) British Petroleum (NYSE:BP). To play the Pound downtrend via stocks,  short the GBP proxies like the ETFs: FXB, GBB.
      • Binary option traders on these assets would buy calls.

    If, like the ECB, the BoE comments reflect a news hawkish (pro-rate hike) policy, expect the opposite to happen, and traders should take the opposite positions. For example:

    • Forex binary option traders buy calls on the GBPUSD, GBPJPY, and EURGBP.
    • Stock binary option traders would buy puts UK stocks and indexes.
      US Retail Sales To Confirm/ Refute Signs Of Hope From US Jobs Reports

     

    While US inflation remains subdued, the Fed has little near term pressure to raise rates, and so it must see a few months of sustained major improvement in both jobs and spending. Friday’s jobs report showed a possible start of real improvement – now we need to see that improvement reflected in spending.

     

    How To Trade

     

    If the report decisively beats forecasts (0.7% for Core Retail Sales m/m, 0.6% for Retail Sales), that would suggest the USD and US stocks are probably  heading higher, because this news would suggest both better growth (good for stocks and industrial commodities) and would also increase expectations for the size and pace of short term rate increases, which would boost demand for the USD.

     

    Forex: Expect the major USD to rally. Intraday forex traders would expect the EURUSD to drop, and the USDJPY to rise. Forex binary option traders would buy calls the EURUSD, and puts on the USDJPY. Those without forex accounts could play these moves via the related ETF proxies for these. That is, buy EUO, UUP, sell FXY, JYF,  FXB, and GBB.

    Stocks and Stock Indexes: These should rally so short term traders get long on these assets or their ETFs like SPY, DIA, and QQQQ. Binary option traders would buy calls for these.

     

    EU Summit: Setting Up The Second Annual EU Spring Break(down)?

    The EUR has been strongly bid up and is overbought given rising expectations for rate increases in the coming months. However this and coming EU meetings could well be bearish for the EUR and if really mismanaged, could bring the second annual EU spring crisis.

    In essence, an expanded bailout program is needed, however that will mean increased German contributions. However with German elections at the end of March and German voters opposed to making further gifts, German leaders have been adamantly opposed to further concessions at Germany’s expense. If last year is any guide, they will block any realistic solution until the EU again reaches a spring break down due to threat of imminent default from one or more of the PIIGS. At that point German leaders will yield and offer more cash because they can tell their voters that the alternative would be worse.

    Thus while there is no crisis, expect the meeting this Friday to yield nothing and raise uncertainty about the EU and its banks, which hold most of the dubious PIIGS bonds. That’s bearish for the EUR and other risk assets, especially those more closely related to the EU, like EU stock indexes and banking stocks like Deutsche Bank (NYSE:DB) or Santander (STD).

    Because the meeting is to last most of Friday, any news may not come out until the week is almost over and thus the likely downtrends in the EUR and other risk assets may not play out until next week.

    When/if they do, likely short term trends include:

    • Forex: short major EUR pairs, forex binary option traders buy puts on the obvious anti-EUR pairs like the EURUSD, EURCHF, and EURJPY.
    • Stocks and Indexes: short those related to the EU. Binary option traders buy puts on those.
    • Commodities: Oil’s moves will depend more on MENA events, so too hard to call.  Gold however, has tended to move up when the EUR falls, so long gold, and binary option traders buy calls on gold.

     A final bearish note, if history is any guide, the ECB’s raising rates during a time of spiking oil suggests a big pullback coming in risk assets, see:  CHART OF THE DAY: Uh-Oh, Here's What Happened The Last Time The ECB Hiked Rates In An Oil Spike

     

    DISCLOSURE & DISCLAIMER: AUTHOR SHORT THE EUR FOR PERSONAL PORTFOLIO. THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READER

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