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Europe, Spain and China Setting up Short Plays

|Includes:EWG, EWP, FXP, iShares Europe ETF (IEV)

Worry over European sovereign debt puts pressure on global stocks. We talked last week about opportunities developing in specific country ETFs on the upside, but the Portugal sovereign debt news today is putting some pressure on stock prices overseas. Europe ETF IEV broke below support at $38.60 today inviting the short sellers to take advantage of the downside risk. Germany (NYSEARCA:EWG) is down 1.1% and Spain (NYSEARCA:EWP) is down 1.1% as well. The move in EWP takes out the November low as the downtrend accelerates. EWP remains a good opportunity on the downside. If the news continues to be negative relative to the sovereign debt the fund is likely to test the June low near $30.40 offering an opportunity to be short the country ETF.

Another opportunity on the downside that could result from the debt challenges in Europe is FXP, ProShares UltraShort China 25 ETF. China is down 1.1% today as a result of the news relative to Portugal. If Spain were to follow suit on a bailout the impact to China would be worth playing the downside. Remember FXP is leveraged 200% adding risk to the play. Take that into account before investing.

As with any investment make sure you weigh the risk relative to the potential reward. Determine your entry, exit and target prior to investing.




Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Stocks: IEV, EWG, EWP, FXP