Trading Implications of Japanese Earthquake (YCL, YCS, EZJ, EWV, TAYD, STRN)

Stock markets across Asia finished lower and opening European markets followed suit after a massive 8.9 magnitude earthquake off the coast of Japan shook Tokyo skyscrapers and sent a tsunami crashing into the island nation.

There are reports of widespread power outages as night falls on Japan. At least one fire has been reported at a refinery and another at a nuclear power plant but so far there are no reported signs of radiation leakage. As a safety precaution, many refineries and nuclear reactors have been shut down.

A tsunami alert was issued for many countries around the Pacific ocean. These include Hawaii and west coast of the United States, Russia, the Philippines and many more.

The quake has already had a far reaching impact on the world's financial markets. Insurers with exposure to the Japanese economy have been particularly hard hit, while construction companies in Japan will have the dubious benefit of increased sales and higher stock prices in anticipation of the reconstruction work that will be needed.

The Japanese yen initially was lower on news of the widespread damage caused by the earthquake and the tsunami that it created but later reversed course as traders remembered that after the 1995 Kobe earthquake many Japanese investors cashed out of overseas investments and put their funds to use at home.

Taylor Devices, Inc. TAYD and Sutron Corporation STRN are two companies that operate in the oceanography market space and are receiving increased attention this morning due to the earthquake and tsunami that hit Japan.

North Tonawanda, New York-based Taylor Devices, Inc. (TAYD) continues to achieve growth in the developing seismic protection field and in the isolation of wind-induced vibrations.

Sterling, Virginia-based Sutron Corporation (STRN) is a provider of products, systems, services and software to a diversified customer base of federal, state, local and foreign governments, engineering companies, universities and hydropower companies in the hydrological, meteorological and oceanic real-time data collection and control market.

If the Japanese yen shows further strength due to an inflow of funds destined for reconstruction work, ProShares Ultra Yen YCL, which seeks to provide daily investment results (before fees and expenses) that correspond to twice the daily performance of the U.S. Dollar price of the Japanese Yen, will be a profitable investment.

If the strengthening Yen is just a short-term occurrence and it begins to weaken, the ProShares UltraShort Yen YCS, which seeks to provide daily investment results (before fees and expenses) that correspond to twice the inverse of the daily performance of the U.S. Dollar price of the Japanese Yen, will be the better investment.

Although the Japanese market is most likely to open lower next week, investors who see it as a buying opportunity and feel that a recovery is on the horizon should take a close look at the ProShares Ultra MSCI Japan EZJ, which seeks seeks daily investment results, before fees and expenses, that correspond to twice the daily performance of the MSCI Japan Index.

Investors who feel that Japanese stocks will continue to be hurt by the catastrophe should consider the ProShares UltraShort MSCI Japan EWV, which seeks daily investment results, before fees and expenses, that correspond to twice the inverse (opposite) of the daily performance of the MSCI Japan Index.