The jury is still out on Abenomics. Will Minister Shinzo Abe’s economic stimulus program turn around the moribund Japanese economy? The rebound in the Nikkei and the upturn in recent economic data point to continued improvement, but the question remains, how fast and how much?
An economical way to participate in a potential resurgence of the Japanese market is through a long term options play on iShares MSCI Japan (EWJ) Exchange Traded Fund.
EWJ had been in a tight trading range from $9 to $11 since 2009 with a three plus year sideways move. The breakout in the beginning of 2013 targets a minimum move to $13 with $14 + the objective based on the technical wedge pattern on a breakout above the recent highs. Only a close below the $9.00 support level on the weekly basis would negate the bullish trend.
TRADE SET-UP
Buy the January 2016 EWJ $9.00 Call at $3.25 or less.
This option strike gives you the right to buy the shares at $9 per share with absolutely limited risk. The 52 week low is at $9.59 with the option strike price below that. The January 2016 option has over TWO YEARS for BULLISH development.
The maximum loss is limited to the $325 or less paid per option contract. The upside, on the other hand, is unlimited. The EWJ option trade break-even is $12.25 at expiration ($9.00 strike plus $3.25 option premium). A 20 cent upward move from the current price in the next TWO YEARS makes this play profitable. If shares hit the target breakout objective at $14, the option investment would gain 50% to $5 plus.
For more long term investing trends and economic commentary, check out www.tradewithlarry.com
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