Stock markets enjoyed yet another day in green territory as investors rejoiced over encouraging economic data on the home front. The latest jobless claims report gave the bulls a reason to rally after the figure came in better-than-expected; the number of people who filed for unemployment benefits fell to 358,000, versus the expected 370,000. News from the Euro zone also bolstered confidence as Greek leaders were able to finally strike a deal and secure the necessary international rescue funds [see also Doomsday Special: 7 Hard Asset Investments You Can Hold In Your Hand].
With good news on the horizon, investors will likely remain focused on the currency bloc as German inflation data is slated to come out later today. Our ETF to watch for today, the iShares MSCI Germany Index Fund (EWG), may experience an increase in trading volumes as investors react to the latest economic report; analysts are expecting for German CPI to come in unchanged at 2% [see also Euro Free Europe ETFdb Portfolio].
EWG has staged an impressive recovery since sinking all the way down to $16.96 a share on 10/4/2011, however, this ETF is once again near resistance levels which it previously failed to break above. Notice how on 10/27/2011 EWG encountered heavy selling pressures as it flirted with the $23 level; this ETF is back above $22 a share, although this time it has been creeping up rather than jumping, which may lead some traders to believe that this current leg-up is a lot more sustainable than its previous surge which ultimately failed [see EWG Technicals].
Another piece of bullish evidence from a technical perspective is the fact that EWG has been advancing on relatively high volume; notice how on 1/27 and 2/2/2012 EWG worked its way higher while trading volumes topped 10 million shares, perhaps suggesting that bigger, longer-term investors, and not just short-term traders, are getting on board.
If the latest German CPI report paints a worrisome picture for this European powerhouse, investors may find themselves pulling the sell trigger. In terms of downside, this ETF has viable support around $22 a share, although investors should note that major support lies at the $20 level, and a close below this mark would be a bit worrisome. On the flip side, if the latest German CPI release adds to the list of encouraging news, EWG may stage a nice rally [see Three Long/Short Ideas For Euro Zone Debt Drama]. In terms of upside, this ETF could encounter selling pressures as it approaches the $24 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.
Disclosure: No positions at time of writing.