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

by on October 23, 2012 | ETFs Mentioned:

Stocks kicked off the week on shaky footing as major equity indexes struggled to hold above key support levels following Friday’s massive sell-off. Markets briefly peered into positive territory Monday morning as elections in Spain over the weekend restored bailout hopes for the debt-burdened nation. Better-than-expected earnings from Caterpillar received little to no attention as profit-taking pressures broadly dominated markets throughout the entire session [see also ETF Insider: Buy On This Dip With Caution].

Earnings season continues full steam ahead at home, while on the international front the Bank of Canada interest rate decision comes into the spotlight later today. As such, our ETF to watch for the day is the iShares MSCI Canada Index Fund (EWC, B), which may see an increase in trading activity following the economic commentary issued after the rate decision; analyst are largely expecting for the nation’s benchmark rate to remain unchanged at 1.0% [see also Free Report: How To Buy The Right ETF Every Time].

Chart To Watch

Following its bull-run since bottoming out in July of this year, this ETF appears to be trading in a “sweet spot” from a technical perspective. Notice how this ETF has been oscillating between the $29 and $28 levels since hitting $29.63 a share on September 14, 2012; EWC recently failed to summit the $29.50 level, and proceeded to decline towards support closer to the $28 mark. Seeing as this fund is currently trading near the bottom-half of its short-term range, seasoned traders may wish to jump in at current levels in anticipation of it bouncing higher, just as it has previously done so [see Canada ETFs: 9 Ways To Play].

Click to Enlarge

While it’s encouraging to see this ETF trading above its 200-day moving average (yellow line), conservative investors may wish to hold off from jumping in long as EWC has posted lower-highs since its most recent peak at $29.63 a share [see our ETF Technical Trading FAQ].

Outlook

If the Bank of Canada issues a surprisingly pessimistic outlook, EWC could face major headwinds; in terms of downside, the first level of support for this ETF comes in at $28 a share followed by the $27 level. A bullish economic outlook, on the other hand, may encourage buying; in terms of upside, this ETF has major resistance just shy of the $29.50 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

Follow me on Twitter @SBojinov

[For more ETF analysis, make sure to sign up for our free ETF newsletter or try a free seven day trial to ETFdb Pro]

Disclosure: No positions at time of writing.