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AbeSmith

Fxi

By AbeSmith, in Swing Trading and Position Trading

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AbeSmith    10

AbeSmith
Posted

Hello. Yesterday on Bloomberg TV or CNBC a guest was talking about China being more immune to the global economic slowdown. Here is an article about China stock market rising due to new economic data that came out Thursay:

 

http://www.chron.com/disp/story.mpl/ap/fn/5482567.html

 

There is a chance that a fed rate cut will stimulate the global economy, if only in the short term. If that is the case then I think China would yield the higher return. The FXI is an ETF that follows the Chinese market closely.

 

fxijj2.jpg

 

You can see a blue line around 147 designating the resistance that was broken and now price has come back down towards the resistance and closed at that area. A good swing trade might be to buy it here. You can place your stop just below the main low around 134, or might want to do a tighter stop and just test price action on the retest of this s/r level at 147. I'm already long FXI from 150, with a stop just below the low at 134. But I might move the stop a bit higher. Not sure.

 

Anyways, I'm not sure about this setup. If you are new to the site you should know that I'm new to trading so be careful.

 

Would welcome any comments about this setup. Do you think market will stay above the main low that was formed at 1/22 ahead of the Fed meeting? That is my guess. Do you think Fed will cut rates significantly and cause a rallie? I'm not sure. Do you think this trade is too risky?

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james_gsx    16

james_gsx
Posted

If I had bought this, this is how I would set up the trade.

 

My first stop would be around $134 like you said. My first target would be around $160 where I would exit 2/3rds of the trade and move my next target to $170 and my stop to break even.

 

Heres what I don't like about this setup. Initially I'd only feel comfortable for a quick push to $160. But with a $134 stop thats a bad risk/reward for me; since I'm risking $14 for roughly $10. It would make a little more sense if my first target was $170 - but I like things to happen fast. Whatever fits your risk parameters and your plan then stick with that.

 

attachment.php?attachmentid=4914&stc=1&d=1201324835

fxijj2.thumb.jpg.8c9055f7ebbbef15e66ce27af0ad4590.jpg

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AbeSmith    10

AbeSmith
Posted

Thanks James. I might do it that way. Except for the last 3rd I might put the stop a bit below break even, perhaps at 146. Depends when it hits the 160 target and market sentiment. Does it hit the target after a rate cut, as a reaction to it? That might be a stronger, more sustaineable move that might go further, perhaps 165 or more. Or does it hit the target prior to the fed meeting in anticipation of a rate cut, or due to independent China market moves? Then it might be good to take some off the table IMO ahead of the rate cut. B/C US market reaction to rate cut I think will have a significant impact on the Chinese market. Just some thoughts. Not sure how I will play it.

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AbeSmith    10

AbeSmith
Posted

Looks like I got in too early on FXI. Last night Asian markets tanked. Shanghai lost over 7%. And explanation I heard on CNBC World was that it was due to the US markets closing lower on Friday. I heard no China specific reason, like poor economic number from China causing the sell off. So today my plan was that if markets close lower then I might close this trade. But today markets closed significantly higher. Will that mean that China will follow US markets and have big gains tonight?

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AbeSmith    10

AbeSmith
Posted

Look at the daily volume of FXI on 1/22 and 1/23. It is 22 million. That is totally unmatched for FXI for as far back I can see on my chart. The next biggest volume is around 14 million. The 22 million is the same time frame the Dow and S&P showed support when emergency rate cut was announced. But looking at the INDU chart, the daily volume at 1/22 and 1/23, although high at 3 million, was matched several times in 2007. The 22million FXI volume however, is unmatched.

 

What does this mean? Why so much more relative volume on the FXI than INDU and S&P (S&P also similar to INDU in this regard)?

FXI.thumb.jpg.66c4d4e456cfe86472edb69dd319df22.jpg

INDU.thumb.jpg.0dc0c0c9861ab0a3464dc2dc21556460.jpg

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