Why You Should Watch US Dollar

August 21, 2001
Eddie Kwong

The recent decline of
the US dollar caused certain stocks, especially companies with big
European businesses, to rally out of the doldrums. According to Reuters’ report
last Saturday (8/18/01), if the euro can sustain a 5% gain against the US
dollar, Heinz’s profits will increase 5 cents per share for the full year 2002.
Also, Kellogg Company could gain 2 cents a share, and significantly more if the
euro strengthens as much as 10% or more.

The chart below is a daily chart of Kellogg Company (K)
as of the close yesterday (8/20/01). Curiously, the stock broke out of a
triangle and closed at a 52-week high on 8/17/01, one day before the Reuters
news. Transaction volume was almost 25% more than its daily average, and the
issue finished near the day’s high. The following session (8/20/01), Kellogg
successfully managed to extend its gains, even though many traders sat on the
sideline because of the Fed meeting on Tuesday.

Now, let’s see Kellogg’s five-minute
chart from today’s session. Our first daytrading opportunity came at 9:40 a.m.
when the stock took out yesterday’s high. Our second buy entry point occurred
around 10:45 a.m. when the stock rallied out of an ascending triangle.