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

by on July 11, 2012 | ETFs Mentioned:

Stocks slid into red territory yesterday as a dismal start to earnings season welcomed back the bears on Wall Street. Alcoa’s (AA) quarterly loss didn’t sit too well with investors, while disappointing results and a deteriorating outlook for the semiconductor industry from Applied Materials (AMAT) only added to the list of uncertainties eating away at investors’ confidence. To top it all off, small business confidence in the United States came in worse than expected; the figure dropped to 91.4 compared to last month’s reading of 94.4 [see also What Are Futures? The Ultimate Beginner's Guide].

Investors will focus their attention on inflation data from the eurozone tomorrow morning before earnings season resumes on Wall Street. As such, the iShares MSCI Germany Index Fund (EWG) is on our watch list as it could see a spike at the opening bell depending on investors’ reaction to latest German consumer price index data. Analysts are expecting for Germany’s inflation rate to remain unchanged at 1.7% [see also Euro Free Europe ETFdb Portfolio].

Chart Analysis

EWG is currently trading near the lower-half of its longer-term range; notice how this ETF previously held above the $18 level on November 25 and December 19 after it bottomed out at $16.96 a share on October 4, 2011. Since then, EWG has managed to rise above its 200-day moving (yellow line) average only to fall victim to selling pressures near resistance at the $24 level, which it previously failed to summit on October 27, 2012 [see also 3 ETF Trading Tips You Are Missing].

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Although EWG appears to be holding support above the $18 level (blue line) as it has previously done, one piece of bearish evidence may suggest the bounce back higher could be a bumpy ride; notice how this ETF has been making a series of lower-highs and lower-lows (red line) since its most recent peak at March 19, 2012 [see also ETF Technical Trading FAQ].


If today’s German CPI report paints a gloomier-than-expected picture, the outlook for the entire eurozone will likely deteriorate. In terms of downside, EWG has minor support at $19 a share followed by the $18.50 level. On the other hand, a bullish reaction to the latest inflation report could inspire buying pressures and bolster European equities higher. In terms of upside, EWG has resistance at $20.50 a share, although the real challenge will be to summit the 200-day moving average right around the $21 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.