Weekly Binary Options Trading Briefing 3/25-31/2013 – Potentially Volatile Start to the Week as Negotiations in Cyprus Continue
Binary Options Trading Recommendations for the upcoming week – Markets Information and Trading Tips
Nike helps S&P turn around into week’s close. Fed meeting shows cautious optimism, 2% GDP growth rate. Market volatility to depend on policymaker activity prior to next week’s negotiation deadlines.
Potentially Volatile Start to the Week as Negotiations in Cyprus Continue
The S&P 500 closed modestly lower for the week (down 0.2%), as positive earnings results from Nike (which saw a rally of 11%) helped to offset some of the broader uncertainties created by the situation in the Eurozone. As far as event risks, most of the attention was focused on the FOMC monetary policy meeting, which showed the US central bank is cautiously optimistic on recovery prospects and now expected annual GDP to come in above 2%. Most newspaper headlines were focused on the situation in Cyprus, and the situation could still create a particularly volatile open on Monday if markets are left unconvinced by the ability of policymakers to ensure that Cyprus qualifies for an EU bailout.
Looking at the specifics, the ECB made comments on plans to cut emergency funding for banks in Cyprus after March 25th if agreements are not reached with the troika (the IMF, the ECB, and the European Commission). Finance ministers in the Eurozone are looking for a quick proposal from Cyprus to raise nearly 6 billion Euros in emergency loans. Any failure to accomplish this will have negative effects on bank liquidity and weigh heavily on the EUR as investors look for safe haven alternatives.
Next Week’s Activity
Aside from the events in Cyprus, there will be some important data releases which will be necessary for long term trend assessments. In the US, we will see Tuesday data (Durable Goods, and New Home Sales), Wednesday data (4th quarter GDP), and Friday data (Core PCE, and the Univ. of Mich. sentiment survey). Most of these numbers are expected to show improvement, so if we can see a positive outcome in Cyprus and and data releases at (or above) forecasts, we will likely see the S&P break its all-time highs for the week as an outcome like this would be positive for risk currencies and all the major stock indices. In the reverse scenario, I will be looking to enter into downside breakout strategies in both the S&P and JPY currency pairs.
My Trade Ideas:
1. As a trader you are always looking for the most significant potential for a price move at any given time, and at the moment the situation in Cyprus means that this potential for volatility can be found in the EUR/JPY (given that it is a much less liquid pair when compared to the EUR/USD). Obviously, I am not interested in getting into a position before the necessary information is made public, so I will be watching for a downside EUR/JPY break at 121.70 as a trigger for weekly PUT options. To the upside, the level I am watching is 123.40 but I am much more interested in seeing a failure.
2. To balance risks, for stock trades I will be watching home builder Lennar Corp (LEN), which has twice beaten analyst earnings estimates and has recently broken multi-year resistance levels in the $43 area. I am using this break and the expected increase in home sales next week to enter into monthly CALLS in LEN at $43, looking for a rise above $45.
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