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

by on March 23, 2012 | ETFs Mentioned:

Profit taking pressures swept over Wall Street on Thursday as investors digested good news at home, although worse-than-expected developments from overseas stole the headlines. Jobless claims on the home front surpassed expectations, coming in at 348,000 versus the previous reading of 353,000. Manufacturing in China appears to be slowing down a bit after the HSBC purchasing managers’ index for March came in at 48.1, versus the previous reading of 49.6. News from the Euro zone also spooked investors as the latest German PMI came in at 48.1, a noticeable down-tick from the previous reading of 50.2 [see also Euro Free Europe ETFdb Portfolio].

Investors will turn their attention to the north later today as Canadian CPI data hits the street. This makes the iShares MSCI Canada Index Fund (EWC) our ETF to watch for the day as investors react to the latest inflation figure; analysts are expecting for Canada’s CPI to come in at 2.7%, a slight up-tick from the previous reading of 2.5% [see EWC Realtime Rating].

Chart Analysis

This ETF bottomed out at $23.48 a share alongside major equity indexes on October 4th, 2011. Since then, EWC has been marching higher, although it’s journey has been far from smooth sailing. This ETF has established a rising level of support, although investors should note that it has yet to regain its footing above the 200-day moving average (yellow line). Additionally, EWC has attempted, and failed, twice already to establish support above $29 a share; notice how this ETF encountered selling pressures on 10/27/2011 and more recently on 2/29/2012 [see EWC Returns].

Click To Enlarge

Although EWC appears to be holding support at the $28 level, conservative investors should wait until it holds support above the 200-day moving average for an entire trading week, or more depending on individual risk tolerance, before jumping in long.

Outlook

If the latest CPI release comes in weaker-than-expected, investors may pull the sell trigger as economic growth expectations cool off. In terms of downside, this ETF has support at $28 a share followed by the $26 level [see also How To Play A Treasury Bubble With ETFs]. On the other hand, if CPI helps to restore confidence in the markets, EWC could make a run higher. In terms of upside, EWC has considerable resistance at $29 a share, although major resistance comes in at the $30 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.