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

by on October 3, 2012 | ETFs Mentioned:

Major equity indexes oscillated throughout most of the day and ended up in mixed territory as Spain’s debt woes collided with positive economic data on the home ront. Spanish lawmakers caused concerns as they continued to debate whether or not the debt-burdened nation should seek a bailout. On Wall Street, investors cheered on the latest motor vehicle sales report; this figure came in at 15 million, topping analyst estimates of 14.5 million [see also Bernanke Fires Back At QE Critics].

With the limelight still focused on Europe, investors will turn their attention to the latest regional retail sales data for more insights. As such, our ETF to watch for the day is the iShares MSCI EMU Index Fund (EZU, B+), which may see volatile trading at the opening bell. Analysts are expecting for eurozone retail sales to have contracted by 1.9% in August, marking a deterioration from the previous reading of -1.8% [see Euro Free Europe ETFdb Portfolio].

Chart Analysis

This ETF appears to have completed a correction since breaking above its 200-day moving average (yellow line). Since shares bottomed out at $24.77 (blue line) on July 24, 2012, EZU has managed to climb higher along an upward slopping trend line (green line). While the recent dip offers an attractive entry point for those bullish on European markets, this decline may also be the start of longer-term pullback; notice how EZU previously tried, and failed, to summit the $32 level (red line) in late October last year, throughout most of March this year, and again on September 14, 2012 [see also How To Pick The Right ETF Every Time].

Click To Enlarge

Conservative investors ought to consider waiting for EZU to establish definitive support above $32 a share before jumping in long, seeing as this is a major resistance level for the ETF [see also 5 Tips ETF Traders Must Know].

Outlook

If the latest retail sales report paints a gloomier-than-expected outlook for the region, European markets will likely face headwinds; in terms of downside, EZU has support at $30 a share. On the other hand, a bullish reaction to the latest economic data could send overseas markets higher; in terms of upside, this ETF has major resistance at the $32 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.