Monday, November 19, 2007

Chinese stocks weakening -- an ETF can help

Note to users of the TradeRadar software -- the FTSE/Xinhua China 25 Index ETF (FXI) generated a SELL signal about a week ago. Using a start date in early March of this year, you will see a clear signal with all green lights on the dashboard.

No one can be sure if this is the bursting of the Chinese stock bubble. If you are interested in a trading opportunity, however, there is now an inverse ETF that will allow you to take a bearish position. It is the ProShares UltraShort FTSE/Xinhua China 25 (FXP).

This TradeRadar SELL signal is based on daily data. Looking at a weekly chart, the SELL signal is not quite as strong as the daily signal but almost. As a result, this may not signal the big crash in Chinese stocks but it seems there is a good potential to see the intermediate term downturn continue for a while.

Knowing how volatile the underlying index is, caution is advised. Be sure to determine a stop before opening the position.

Disclosure: author is nibbling on a few shares of FXP



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