Friday’s ETF Chart To Watch: CurrencyShares Canadian Dollar Trust (FXC)

by on September 28, 2012 | ETFs Mentioned:

The bulls finally returned to Wall Street after a prolonged stretch of profit taking throughout the week. Good news from all around the globe bolstered major equity indexes into bright green territory for the day; overseas, Spain unveiled a detailed austerity plan focused on massive spending cuts. At home, investors cheered on the latest employment report; weekly jobless claims were better-than-expected, with the figure coming in at 359,000 versus the anticipated 375,000 [see also Free Report: Seven Simple & Cheap All-ETF Model Portfolios].

Investors will turn their attention to the north prior to Wall Street’s opening bell as Canada’s GDP report comes out. As such, our ETF to watch for the day is the Rydex CurrencyShares Canadian Dollar Trust (FXC, A) which may experience volatile trading following the latest economic growth reading. Analysts are expecting for Canada’s economy to have expanded by 2.0%, marking a modest decline from the previous reading of 2.4% [see also Which Commodity ETFs Could Outpace QE3?].

Chart Analysis

This Canadian dollar ETF has staged an impressive bull-run since shares bottomed out around the $96 level in late June of this year. Since then, FXC has charged higher, moving within a fairly well-defined upward sloping price channel (blue lines). Aside from  piercing right above its 200-day moving average (yellow line), FXC has also managed to summit historical resistance; notice how this ETF recently settled above $101 a share (red line), which recently served as a major resistance level on 3/1 and 4/27/2012 [see also ETF Technical Trading FAQ].

Click To Enlarge

Short-term traders may consider jumping in long at current levels seeing as how FXC is floating right around the bottom-half of its price channel; this entry point presents an opportunity to set a tight stop-loss in case selling pressures continue, while also favorably positioning yourself before the uptrend resumes [see also 3 ETF Trading Tips You Are Missing].

Outlook

If the latest Canada GDP report come in better-than-expected, the loonie may have the wind at its back for the day; in terms of upside, the next resistance level for FXC comes in at $103 a share. On the other hand, less-than-stellar economic growth may paint a worrisome picture for the nation’s currency and equity market; in terms of downside, this ETF has immediate support at $101 a share followed by the $100 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

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Disclosure: No positions at time of writing.