Friday’s ETF Chart To Watch: MSCI Germany Index Fund (EWG)

by on August 10, 2012 | ETFs Mentioned:

Major equity indexes edged higher for another day as investors reacted positively to several minor data release on the homefront. With no major data releases due out all week across the globe, the bulls made it a point to push higher as weekly jobless claims came in better-than-expected along with reports of a shrinking trade deficit. Art Hogan, equity strategist at Lazard Capital Markets, commented “The underlying bid in this market is consensus agreement that we’re going to get more, not less, global monetary stimulus” [see also 5 Plays In The Beaten Down Energy Sector].

Investors will turn their attention overseas later today as German inflation data hits the street. As such, our ETF to watch is the iShares MSCI Germany Index Fund (EWG, A-), which may experience volatile trading following the reaction to the latest CPI data from the eurozone powerhouse; analysts are expecting for inflation to come in unchanged at 1.7% on a year-over-year basis [see also 17 ETFs For Day Traders].

Chart Analysis

After oscillating between the $18.50 (blue line) and $20.50 (red line) levels since the beginning of June of this year, EWG finally appears to have broken out of this frustrating trading range. Notice how this ETF has managed to close above the $20.50 level for four consecutive days now, which is significant seeing as how it previously failed to do so on June 20, July 3, July 19, and most recently again on July 27, 2012 [see also Ex-Europe ETFdb Portfolio].

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Despite the recent bullish price action, conservative investors should hold off from jumping in long at current levels as EWG is still trading below its 200-day moving average (yellow line) [see also How To Lose Money Trading ETFs].

Outlook

If the latest German CPI report paints a gloomier-than-expected picture, selling pressures could drag this ETF back below the resistance level it recently conquered; in terms of downside, EWG has support at $20.50 a share followed by the $19.50 level. On the other hand, a bullish reaction could reignite positive momentum in this ETF; in terms of upside, EWG could face selling pressures between $21 and $21.50 a share in the near-term. 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.