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How to Trade on a Slowing China

Friday, 11 May 2012 | 2:30 PM ET
An employee stacks grills for Geely Automobile Holdings Ltd. Emgrand 7 series automobiles at the company's factory in Cixi, Zhejiang Province, China.
Bloomberg | Getty Images
An employee stacks grills for Geely Automobile Holdings Ltd. Emgrand 7 series automobiles at the company's factory in Cixi, Zhejiang Province, China.

China's industrial production report was a disappointment, and this strategist has a way to play it.

As if a $2 billion loss by a major bank and swollen oil inventories weren't enough to dampen investors' spirits, China had to come along and report the lowest industrial output in three years. Todd Gordon, co-head of research and trading at Aspen Trading Group, has a plan for trading on investors' gloom.

"I'm short the market," he told CNBC's Scott Wapner. "I think that means you want to be long dollars in the FX market."

Gordon recommends buying dollars against the oil-producing Norway's krone.

Making Dollars & 'Cents' of Global News
CNBC's Scott Wapner reports shares of Chesapeake Energy are down about 2%. Todd Gordon, Aspen Trading Group, also discusses Spain's debt and the currency trade.

He suggests waiting for a pullback, then entering the trade at 5.8400 with a stop at 5.8000 and a target of 5.9000.

How can you judge whether this will work?

"Watch the 1365 market level on the S&P," says Gordon, a technical strategist. "That is going to spell that dollar pushing higher if 1365 holds."

You can watch the discussion on the video.

Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm.

Learn more: The essential vocabulary for currency trading is on Key Currency Terms. Top currency strategies are broken down for you in Currency Class.

Talk back: Tell us what you want to hear about - email us at moneyinmotion@cnbc.com.

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