Slick Picks For Year End Bulls

by on December 27, 2011 | ETFs Mentioned:

Equity markets inched higher last week as news from the Euro zone was sparse, while economic data releases on the home front surprised to the upside. The final trading week of one of the most volatile periods in financial history is sure to abundant with more of the same: excitement, drama, and perhaps even the usual chaos. Domestic equity indexes are flirting with modest gains for 2011, although year end selling pressures may create headwinds as investors lock-in profits in anticipation of more turmoil next year. In this edition of ETF Insider we outline three bullish actionable ideas with conservative stop-loss recommendations; positioning our trades favorably in case the bulls continue their stampede, while also protecting ourselves from a potential sell-off.

Weekly Outlook

The coming week will be very sparse with economic data releases at home and on the international front. Below, we highlight ETFs that may see an increase in trading activity as relevant market data is released and evaluated by investors:

  •  iShares Dow Jones U.S. Home Construction Index Fund (ITB): ITB may see an increase in trading volumes as investors digest the latest pending home sales data from November on Thursday morning. With a streak of positive surprises in the domestic housing market over the past month, investors will look to see this figure come in above last month’s increase of 10.4%.
  •  iPath S&P 500 VIX Short Term Futures ETN (VXX): Volatility may spike if this week’s jobless claims data disappoints investors, with analysts expecting the figure to come in at 374,000 versus last month’s 364,000. 
  •  Van Eck Market Vectors Germany Small-Cap ETF (GERJ): German consumer price index is slated to come out before Wall Street opens on Friday, and analysts are expecting for the figure to come in at 2.2% versus the previous reading of 2.4%. GERJ may experience volatile trading as investors digest the latest inflation data out of Germany.
  •  State Street SPDR Gold Trust (GLD): Gold has posted a respectable performance in green territory for the year amidst all of the uncertainty, although its run-up has also been accompanied by unprecedented volatility. Many investors may be adjusting their allocations to the precious metal going forward; with some “buying on the dip”, while others continue to take profits and raise cash.

The roller coaster ride that 2011 has shaped out to be is not over yet. Low trading volumes in the final week of the year may pave the way for range-bound price action across major indexes as optimism struggles to overcome overhanging Euro zone debt. Below, we have highlighted three technical trading ideas for the upcoming week. Note that most of these recommendations require active management as they are only relevant for a very short period of time. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.

Actionable ETF Idea #1: Long ECH

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