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

by on April 4, 2012 | ETFs Mentioned:

Selling pressures prevailed on Tuesday as investors fretted over commentary from the latest FOMC meeting. Stocks took a nose dive lower after Chairman Bernanke made no direct hints of more stimulus to come. With no word on QE3, investors were quick to take profits across virtually every asset class; stocks and bonds both plunged lower alongside falling gold prices [see also 3 ETFs For The End Of Operation Twist].

Investors will turn their attention overseas later today as the European Central Bank announces its decision regarding interest rates. Although analysts are anticipating for the rate to remain unchanged at 1%, the economic commentary following the decision itself could lead to volatile trading for the popular iShares MSCI EMU Index Fund (EZU). This ETF, which tracks the performance of equity markets of countries who have adopted the euro as their currency, could see an increase in trading volumes as investors digest the latest news out of the debt burdened currency bloc [see also 3 ETF Trades For The Next Euro Zone Debt Crisis].

Chart Analysis

This ETF has been gradually marching higher since bottoming out at $25.57 a share on 9/23/2011; in fact, its support near the $26 level bears a close resemble to a triple-bottom pattern. Notice how EZU bounced off the $26 level on 9/23, 10/4, and most recently again on 11/25/2011. Although EZU hasn’t staged an impressive run-up in 2012 like many other equity ETFs, this fund appears to be on slow and steady path to recovery given its positive momentum and the tremendous support it has established above the $26 mark [see also Euro Free Europe ETFdb Portfolio].

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Establishing a long position at current levels may be appealing seeing as how EZU recently broke above its 200-day moving average (yellow line); this could be interpreted as bullish evidence, perhaps suggesting that EZU is in the beginning phase of an uptrend. Investors should be aware of potential resistance at $34 a share as this ETF failed to summit this level back on 10/27/2011.

Outlook

If the European Central Bank issues an upbeat economic commentary following the interest rate decision, European equity markets could stage a rally. In terms of upside, if EZU resumes its uptrend, the next level of resistance comes in at the $34 level for this ETF. On the other hand, a pessimistic outlook could put a dent in stock markets [see EZU Realtime Rating]. Likewise, EZU may find itself struggling to stay afloat if selling pressures accumulate. The first level of support for this ETF comes in at the 200-day moving average (yellow line) followed by the $30 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.