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ETF Plays on Europe's Emergency Package

NEW YORK ( TheStreet) -- The "nuclear option," or the somewhat last report taken by the European Union and International Monetary Fund to stabilize the euro and the eurozone, opens the possibility of opportunity in certain equities.

  • CurrencyShares Euro Trust (FXE), which closed at $127.51 on Monday.
  • SPDR Euro STOXX 50 (FEZ), which allocates nearly 19% of its asset base to the PIIGS (Portugal, Italy, Ireland, Greece and Spain). FEZ closed at $35.10 on Monday gaining more than 10% over the day.
  • iShares MSCI EMU (EZU), which allocates nearly 15.4% of its assets to the PIIGS. EZU gained nearly 10% on Monday closing at $32.52.
  • SPDR Barclays Capital International Treasury Bond (BWZ), which allocates 11.8% of its asset base to Italy, 3.5% to Span and 2.2% to Greece. BWZ closed at $34.19 on Monday, adding nearly 1.6%.

Although this nearly $1 trillion emergency financial package which includes standby funds and loan guarantees seems like a good resolution, it will only be effective and sustainable if Europe's weakest economies can manage their debt and the European Union can develop more coherent economic and fiscal policies to underpin the euro.

Because of the volatility of the region, it's important to have an exit strategy which identifies specific price points at which an upward trend could come to an end in the exchange-traded funds mentioned.

According to the latest data at SmartStops.net, an upward trend could come to an end at the following price points: FXE at $126.78; FEZ at $33.56; EZU at $31.05; BWZ at $32.86.

Written by Kevin Grewal in Laguna Niguel, Calif.

At the time of publication, Grewal had no position in the securities mentioned.

Kevin Grewal serves as the editorial director and research analyst at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Additionally, he serves as the editorial director at SmartStops.net where he focuses on mitigating risks and implementing exit strategies to preserve equity. Prior to this, Grewal was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.

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SYM TRADE IT LAST %CHG
BWZ $30.32 0.00%
FEZ $39.16 0.00%
EZU $38.95 0.00%
FXE $105.80 0.00%
AAPL $124.25 0.00%

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