Friday’s ETF Chart To Watch: FTSE China 25 Index Fund (FXI)

by on April 13, 2012 | ETFs Mentioned:

Equity markets climbed higher on Thursday as investors brushed off the worse-than-expected jobless claims report, instead focusing on upcoming earnings from tech giant Google and financial behemoths JPMorgan and Wells Fargo. The weekly jobless claims figure showed 380,000 filings for unemployment, which was a bit steeper than the expected 359,000, and also above the previous reading of 367,000. Nonetheless, stocks climbed higher right from the opening bell with the Nasdaq leading the rally [see Free Report: Seven Simple & Cheap ETF Model Portfolios].

Investors will briefly take their eyes off earnings results as the latest China GDP data comes into focus on Friday. The iShares FTSE China 25 Index Fund (FXI) could see an increase in trading volumes as investors react to the latest economic growth figure; analysts are expecting for GDP growth of 1.9%, a slight down-tick from the previous reading of 2.0% [see our Asia-Centric ETFdb Portfolio].

Chart Analysis

FXI is currently trading at attractive levels for those looking to establish a long position; notice how this ETF has been climbing higher along a rising support line since bottoming out at $28.61 a share on 10/4/2011. Furthermore, FXI has broken above its 200-day moving average (yellow line) since then, perhaps suggesting that it is in the beginning stages of an uptrend. FXI recently encountered resistance at the $40 level, and since then the ETF has staged a healthy correction, pulling back to and establishing support right around $36 a share [see FXI Technicals].

Click To Enlarge

Conservative investors may wish to wait until FXI establishes definitive support above its 200-day moving average (yellow line), or $38 a share, before jumping in long. If FXI fails to hold above $36 a share, selling pressures could accelerate and bring it down to the $34 level or perhaps even lower [see also Defensive Equity ETFs For Earnings Season].

Outlook

If China GDP blows past expectations, buying euphoria could sweep over both foreign and domestic equity markets. In terms of upside, FXI has minor resistance around $38 a share followed by major resistance just above the $40 level. On the other hand, a worse-than-expected GDP report can easily tip this ETF south. If selling pressures prevail, FXI could lose its grip and re-test support at $34 a share, while a break below this level would be quite worrisome [see also 5 New, Noteworthy ETFs From Q1]. 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 position at time of writing.