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Profiting From Tectonic Shifts In The Stock Market

01/20/11 08:28:34 AM
by Billy Williams

There are major shifts under way in the market, and you can reap huge gains if you're on the right side...

Security:   EWA, EWC, RSX
Position:   Buy

Under the Earth's surface, when the tectonic plates shift, the effects can be as slight as a faint rumble or as severe as a massive earthquake, depending on the shift that is taking place. It is at these times when the tectonic plates in the markets begin to shift that you see tremors ripple throughout and affect everything they touch from your kid's college fund, your retirement plans, to your ability to get financing for your house or business.

While unsophisticated investors or observers lament about the trouble that comes from these times of change, professional speculators look for new emerging trends and how to capitalize on them. Observing the fundamentals that take place and their effects on specific segments of the markets can help you determine low-risk ideas to build a trading strategy around.

Now, in the current market, there is a shift taking place from paper assets to hard assets, from equities in companies to physical resources like copper, gold, silver, and aluminum.

Even more in demand are energy-based resources such as oil, uranium, and coal. Emerging markets like China and India are competing feverishly with the United States for energy deals, including exploration, production, and the importation of these resources to create the energy these countries need to develop and compete on the global stage.

For many Western countries who have been financial centers for the world, a shift has begun to where emerging markets now turn toward developed countries that are rich in resources. It's these resource-rich countries that now stand to reap the windfall of economic benefit as demand from emerging markets start a bidding war for their needed materials.

FIGURE 1: RSX. RSX has been trading in an upward price channel but has not broken out sharply to the upside, signaling a huge buying opportunity.
Graphic provided by:
Russia is one of the beneficiaries of the rising demand, since it's rich not just in diamonds and coal but also because it is the third-largest producer of oil in the world. While the Middle East stands as the dominant producer of oil, it also sits in a volatile region where religious fundamentalism is a constant threat to the ruling elite, such as the Jordanian monarchy and the House of Saud. Russia sits securely near Europe's borders and offers much greater stability both politically and economically. See Figure 1.

FIGURE 2: EWA. EWA has been consolidating in price near a critical price high, which would offer you a good entry point as the commodity boom gets ready to explode.
Graphic provided by:
Australia is an attractive investment due to its geographical position near Asia and has close ties to China, South Korea, India, and Japan. With strong mining industries, it not only has easy entry into Asian markets but also retains strong ties to the US and Europe, remaining one of the West's stalwart allies. As a result, Australia has excellent access to a variety of buyers, giving it a plum position in the upcoming commodity boom. See Figure 2.

FIGURE 3: EWC. It's apparent that EWC is in a solid trend, and with Canada rich in natural resources and in a stable part of the world, it should continue as the demand for its resources continues to grow.
Graphic provided by:
Canada also is an extremely good play on the commodity boom, as it is already the US's #1 oil trading partner but has the added benefit of having a strong stable government and shares a common border with the world's strongest superpower. See Figure 3.

Investing early in any of these countries' exchange traded funds (ETFs) has the potential of a strong return, especially as the trend begins to emerge, giving you a head start with the potential to add more as the trend confirms itself.

Billy Williams

Billy Williams has been trading the markets for 27 years, specializing in momentum trading with stocks and options.

E-mail address:

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Date: 01/25/11Rank: 3Comment: 

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