Thursday’s ETF Chart To Watch: MSCI EMU Index Fund (EZU)

by on August 16, 2012 | ETFs Mentioned:

Major equity indexes tracked sideways with an upward bias for yet another trading session this week, helping to keep bullish sentiment levels elevated. Markets had little reason to move as trading volumes remain seasonally low while data releases offered no major insights; consumer prices at home stayed the same as higher food costs were offset by lower energy prices, which helped ease lingering inflationary concerns [see also The Ultimate Guide To Investing In Gold Coins and Bullion].

Investors will shift their focus to the eurozone later today as the currency bloc reports its own consumer price index. As such, the iShares MSCI EMU Index Fund (EZU, A-) could experience volatile trading if the latest CPI reading surprises the market; analysts are expecting for inflation to come in at 1.7%, marking a slight uptick from the previous reading of 1.6% [see also Euro Free Europe ETFdb Portfolio].

Chart Analysis

This ETF has been flirting with resistance at its 200-day moving average (yellow line) for the last two weeks as it has consistently traded sideways without making a break in either direction. Lackluster eurozone GDP results earlier in the week didn’t really move this ETF in either direction, which could be interpreted as a bullish sign since it remains above the $28 level. This is significant because the last two times EZU bounced off $25 a share (blue line) it failed to summit the $28 level on June 20 and July 3, 2012 [see also 5 Worst ETF Strategies Of The Last 5 Years].

Click To Enlarge

Although it’s encouraging to see EZU keep its ahead above $28 a share, conservative investors should still consider waiting to jump in long only after shares have settled above their 200-day moving average for five or more consecutive trading sessions depending on individual risk tolerance [see also How To Lose Money Trading ETFs].

Outlook

If the latest eurozone CPI report paints an optimistic picture for the otherwise debt-burdened region, equity markets overseas could finally get the much-needed fundamental reason to push higher; in terms of upside, EZU has resistance at $29 a share followed by the $30 level. On the other hand, a pessimistic reaction could force EZU to retest support; in terms of downside, this ETF has support at $28 a share followed by the $25 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.