We’ve opened a new bearish trade on the Global X FTSE Greece 20 ETF (GREK).
Using the Technical Opportunity Screener from Profit Scanner, we’ve identified a “continuation diamond” on GREK.
The continuation diamond pattern was completed on June 4, when GREK closed below the support level of the pattern.
Based on the pattern, we expect the stock to drop to a target price range of $6.70-$7.70 (as illustrated by the dark red bar in the image above).
Greece came under increased international scrutiny this month when it failed to make a payment to the International Monetary Fund (IMF) June 5. Not only does this missed payment not bode well for Greece in its negotiations with the Troika — the IMF, the European Central Bank (ECB) and the European Union (EU) — it does not bode well for all of the Greek bond holders that are scheduled to receive €3.6 billion when their short-term Greek bonds mature this Friday, June 12. If Greece is unable to come up with the money, we could see a sharp reaction in the Greek financial markets and the Greek economy.
GREK has been consolidating above support at $11.50 for the past month, but that support level looks shaky. We anticipate that negative pressure is going to push this fund down toward support at $10 in the short-term.
ACTION:
‘Buy to open’ the GREK September 11 Puts (GREK150918P00011000) for a maximum price of $1.65.
We decided to be slightly more conservative with our strike price at $11 — instead of using a $10 strike price — because the market has been so volatile, but we are giving ourselves plenty of time to let this trade play out. We would have used an August expiration, but they are not available yet, so we went out to the September expiration cycle. We felt the July expiration was a little too close. We didn’t want time decay to be a major issue for us.
P.S. If you made the trade our colleague, Jon Markman, gave you Tuesday in the United States Natural Gas Fund, LP (UNG), Jon said to take all of your 60% profits as the call options hit their target just hours after he gave the recommendation to Trade of the Day readers.
InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next SlingShot Trader trade and get 1 free month today by clicking here.
You can learn more about identifying price patterns — like a bearish continuation diamonds — and using them to project how far you think a stock is going to move in their Advanced Technical Analysis Program.
