Existing Home Sales Offers A Trading Opportunity


By Darrell Martin

One of the ways to judge the strength of the US housing market and thus, the overall economic strength, is through the numbers generated by the Existing Home Sales report. Released each month, two reports show the change in the number of existing residential buildings sold during the previous month.

Although released at the same time, one report is annualized, while the other is month over month (MoM). Of high importance is the annualized report. Its numbers are forecast to come out at 5.52 million where last month they came in at 5.46 million. With a ranking of medium importance, the month over month report is forecast at 1.5 percent whereas it came out last month at -2.5 percent.

For both reports, a number higher than expected can be regarded as positive for the USD, while a lower than expected number would be negative for the USD. These reports will be released on Wednesday, June 20, 2018 at 10:00 AM ET.

Scheduled news events can be looked at as opportunities for traders. Traders react to the actual information in the news creating momentum and volume in the market, and the news is set for a specific time. If the markets show a consistency in movement to the scheduled news over a number of releases, then strategies can be planned for trading the event. Since it is a scheduled news event, the Existing Home Sales Report offers a trading opportunity.

Based on 12 - 24 past releases, it was found that an Iron Condor strategy offered a high probability trade. Utilizing Nadex EUR/USD spreads, a combined profit potential of at least $30 is a reasonable goal.

Two spreads are needed for this strategy. One is sold above the market, but with its floor where the market is trading at the time. The other spread is bought below the market with the ceiling where the market is trading at the time. Each spread should have a profit potential of $15 or more. The trade can be entered as early as 9:00 AM ET for 11:00 AM ET expirations.

Stops should be placed in the event the market takes off and doesn’t make its typical pull back. If the market moves 60 pips above or below where the market was at entry, stops should be placed at those points to exit the trade and maintain loss to a 1:1 risk reward ratio. Profit is made when the market pull backs and settles between the breakeven points of 30 pips above and below where the market was at entry. When the market settles directly between the two spreads, max profit is earned.

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