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iShares MSCI Germany - EWG - close: 30.26
EWG is a watch list candidate that just graduated to an active trade. The plan was to wait for shares of this ETF to close above $30.00 and then buy calls the next day. EWG met that requirement with Friday's close at $30.26.
European stocks have been climbing. The British FTSE rallied past the 7,000 mark for the first time in history last week. Meanwhile the German DAX index is bouncing back toward its record highs set earlier in March. The European Central Bank has just begun its QE program that could power gains for equities well into 2016.
This EWG trade will open on Monday morning.
I want to remind readers that this is ETF is not hedged against weakness in the euro. The trend is up but its performance will lag the major European markets. You could look at hedged European ETFs but many of them have very low volume and do not have options (especially LEAPS). If you're curious check out these symbols: HEWG, DBGR, DXGE. Be sure to do your homework.
Earlier Comments: February 22, 2015:
The EWG is an exchange traded fund (ETF) that mimics the MSCI Germany index. This includes small, mid, and large-cap companies.
The U.S. market has enjoyed several years worth of QE programs that helped fuel market gains. Now that the U.S. QE program is over Europe is about to start on their own QE program. The European Central Bank (ECB) will start its quantitative program in March this year. The central bank will purchase about €60 billion a month through September 2016 but they've already announced that they will extend this deadline if they need to.
This is significant. After years of promising to do something about the Eurozone economy and fight the threat of deflation the ECB is finally acting. They might be too late to fend off deflation but investors seem to have hope that Europe can turn things around.
Germany should be a prime beneficiary of this program. The ECB's QE will continue to pressure the euro lower and that makes Germany's exports more competitive. Investors are have already starting betting on an improvement in the Germany market with a significant bounce in the EWG.
Today the EWG has broken through technical resistance at its simple 200-dma. Now it's about to challenge resistance near the $30.00 mark. Tonight I am suggesting investors wait for the EWG to close above $30.00 and then buy calls the next morning with a stop loss at $26.85.
FYI: If you want a broader European ETF I did consider the VGK but about half of its holdings are British and Swiss companies and may not see the same benefit from a weaker euro.
Breakout trigger: Wait for EWG to close above $30.00
Then buy calls the next morning with a stop at $26.85 .
BUY the 2016 Jan $30 call (EWG160115c30) current ask $1.95
03/23/15 Trade begins at the opening bell
03/20/15 EWG closed @ $30.26, above our suggested entry: a close above $30.00
Option Format: symbol-year-month-day-call-strike
Originally listed on the Watch List: 02/22/15