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

by on September 21, 2012 | ETFs Mentioned:

Stocks tumbled lower out of the gates although buyers were quick to step in and push major indexes into green territory as the trading session drew to a close. Low volumes and back-and-forth trading prevailed as investors digested a mixed plate of economic data releases at home. On the bright side, the Philly Fed index came in at -1.9 versus the expected -4.0; however, weekly jobless claims disappointed after the figure came in at 382,000 versus the expected 375,000 [see Free Report: How To Pick The Right ETF Every Time].

With no major data releases on the homefront today, investors will turn their attention to the north as Canadian CPI comes out beforethe opening bell on Wall Street. As such, our ETF to watch for the day is the iShares MSCI Canada Index Fund (EWC, B), which could stage a volatile reaction to the latest inflation report. Analysts are expecting for Canada’s consumer price index to come in unchanged at 1.3% [see also How To Play $10,000 Gold].

Chart Analysis

EWC has staged a resilient recovery since bottoming out at $25 a share in late June of this year. While the fund has been able to hurdle over its 200-day moving average (yellow line), those looking to jump in long at current levels should exercise caution from a technical perspective. Notice the historical resistance around $29 a share for EWC; this ETF has tried and failed to summit this resistance level (blue line) back in late October of 2011 and later again in early March of this year [see also 3 ETF Trading Tips You Are Missing].

Click To Enlarge

If the historical price pattern persists, EWC could be in for a correction as profit-taking pressures develop around the $29 mark. Conservative investors looking to get in long should consider waiting and observe how shares react as they look to overcome the historical resistance level that lies ahead [see also ETF Technical Trading FAQ].

Outlook

If the latest CPI release is welcomed with optimism, EWC could end the week on a green note; in terms of upside, this ETF may face profit-taking pressures all the way up to $30 a share. On the other hand, a worrisome inflation report could pave the way lower for Canadian stocks; in terms of downside, the next support level for EWC comes in at around the $28 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.