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

by on October 11, 2012 | ETFs Mentioned:

The bears came out on top at the start of this earnings season as disappointing corporate performance results shed little light on recovery hopes. Alcoa kicked off the ceremonies with better-than-expected results, although its revised outlook was enough to welcome sellers. Energy giant Chevron also missed the mark due to reduced production and lower oil prices while Wal-Mart rose after the company reported a strong “back-to-school” shopping season. In economic news, the Fed Beige showed modest expansion although the encouraging report went virtually unnoticed [see 101 ETF Lessons Every Financial Advisor Should Learn].

Investors will turn their attention to the eurozone today as German CPI comes out before the opening bell on Wall Street. As such, our ETF to watch for the day is the iShares MSCI Germany Index Fund (EWG, A-), which may see an increase in trading activity following the latest inflation report. Analysts are expecting for German CPI to come in unchanged from the previous reading at 2% flat [see Euro Free Europe ETFdb Portfolio].

Chart Analysis

EWG has posted a stellar recovery since shares bottomed out in late July of this year; however, selling pressures have returned as the ETF is trading around historical resistance levels since late last week. Notice how the rising blue trend line acted as support for EWG over the past two months; what’s worrisome is that profit-taking pressures this time around have knocked it off this support line, which may welcome a steeper pullback in the near future [see Free Report: How To Pick The Right ETF Every Time].

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Unless EWG is able to resume its march higher in the coming days, it’s likely that it will consolidate further perhaps towards the $22 level [see also ETF Technical Trading FAQ].

Outlook

If German CPI paints a better-than-expected economic outlook, EWG could rally higher; in terms of upside, this ETF has major resistance around $23.50 a share. On the other hand, a pessimistic inflation following the latest inflation report could welcome bearish pressures; in terms of downside, the next support level for EWG comes in at around $22 a share. 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.