Friday’s ETF Chart To Watch: MSCI Canada Index Fund (EWC)

by on June 8, 2012 | ETFs Mentioned:

Back-and-forth trading dominated equity markets for most of yesterday as stimulus hopes collided with weekly jobless claims data. Fed Chairman Bernanke was reluctant to hint at any more stimulus until a further review of the economic recovery has been conducted, which inevitably paved the way for profit taking. During the first half of the trading day however, investors on Wall Street cheered on the latest employment report which showed 377,000 people filing for unemployment benefits last week, which beat analyst estimates of 380,000 as well as the previous reading of 389,000 [see also Jim Rogers Says: Buy Commodities Now Or You'll Hate Yourself Later].

With no major economic data releases on the home front later today, investors may wish to turn their heads to the north as Canada’s latest unemployment rate is released. As such, our ETF to watch for the day is the iShares MSCI Canada Index Fund (EWC) which may see an increase in trading activity as investors react to the employment data. Analysts are expecting for the nation’s unemployment rate to come in unchanged at 7.3% this time around [see also ETFs For "Hands Off" Investing].

Chart Analysis

EWC has endured a rough correction over the past few weeks; notice how this ETF has come all the way down to the October 4th lows, which is when major equity indexes bottomed out. One piece of bullish evidence is the fact that this ETF appears to be holding above $25 a share (blue line). This is encouraging news seeing as how there is major support at the $25 level; notice how EWC has previously bounced off this level on 10/4/2011, 11/25/2011, and most recently on 6/4/2012 [see ETF Technical Trading FAQ].

Click To Enlarge

Investors who are looking to establish a long position at current levels given the lucrative upside potential ought to exercise caution, seeing as how a break below $25 a share may open the doors for intense selling pressures. Furthermore, traders should consider locking in profits at $27 a share or higher, seeing as how this ETF has been fairly range bound with well-defined resistance around $29 a share.

Outlook

If Canada’s unemployment rate unexpectedly dips, equities could have the wind at their back. In terms of upside, EWC may face potential profit taking pressures near $27 a share, although major resistance doesn’t come in until $29 a share. On the other hand, a disappointing employment report could create headwinds for EWC. In terms of downside, this ETF has major support around $25 a share, while a break below this level would call for re-assessment of the ongoing trend. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques [see also Easy-As-ABC ETFdb Portfolio].

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Disclosure: No positions at time of writing.