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

by on October 31, 2012 | ETFs Mentioned:

U.S. stock markets had an extended weekend as Hurricane Sandy hit the east coast with full force, wreaking havoc upon countless communities and ultimately prompting the closure of the New York Stock Exchange on Monday and Tuesday. On the bright side, the storm appears to be moving along, and markets are set to resume trading later today with the NYSE headquarters running on backup power [see How To Pick The Right ETF Every Time].

With no major data releases due out on the homefront today, many will turn their attention to the latest Canada GDP report. As such, the iShares MSCI Canada Index Fund (EWC, B) will make its way onto our radar screen as it may see an uptick in trading volumes following this data release. Analysts are expecting for Canada’s economic growth to come in at 1.7%, marking a minimal decrease from the previous reading which showed an expansion of 1.9% [see also Sandy May Delay Key Jobs Report].

Chart Analysis

Since surging past its 200-day moving average (yellow line) in mid-August of this year, bullish momentum in shares of EWC appears to have cooled off considerably. This ETF has encountered serious headwinds around the $29 mark; notice how since September, EWC has tried and failed to establish support above $29 a share, first on September 14, then again on October 5, and most recently on October 17, 2012. What’s also noteworthy is the fact that this ETF has managed to bounce off the $28 level after each failed attempt at hurdling over resistance, thus establishing a fairly well-defined range for itself (red lines) [see our ETF Technical Trading FAQ].

Click to Enlarge

Despite its sour performance over the past week, entering into a long position in EWC at current levels is fairly attractive; seeing as how this ETF is trading near the bottom half of its short-term range, traders have an opportunity to tap into upside potential while still being able to keep a close eye on downside risk [see also 101 ETF Lessons Every Financial Advisor Should Learn].

Outlook

An upbeat Canada GDP report can certainly inspire a broad-based rally for equity markets; in terms of upside, EWC will likely face profit-taking pressures as it nears resistance around the $29 level. On the flip side, a disappointing GDP report may open up the doors for sellers; in terms of downside, immediate support for this ETF comes in at $28 a share followed by the $27 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.