Wednesday’s ETF Chart To Watch: MSCI United Kingdom Index Fund (EWU)

by on April 18, 2012 | ETFs Mentioned:

Bullish momentum quickly returned to Wall Street following Monday’s rampant sell-off. Stocks broadly marched higher on Tuesday as investors were pleased to hear that the International Monetary Fund (IMF) had raised its global growth forecast. The IMF expects for global economic growth in 2012 to come in at 3.5%, a modest improvement from the previous estimate of 3.3% issued back in January of this year. Amidst the improving backdrop, gold prices endured a volatile trading day, hitting a low at $1,635 an ounce, only to bounce back and settle near the $1,650 an ounce level [see Free Report: Seven Simple & Cheap ETF Model Portfolios]. 

Earnings season will continue full steam ahead on the home front, although international investors may wish to keep their eyes on the latest news from the United Kingdom. Our ETF to watch for the day is the iShares MSCI United Kingdom Index Fund (EWU), as it may see an increase in trading volumes following the release of Bank Of England minutes as well as the nation’s latest jobless claims report. The release of the bank minutes will help shed light on the health of the fragile recovery overseas, while the employment data will also play an important part in helping to restore confidence [see Euro Free Europe ETFdb Portfolio]. 

Chart Analysis

EWU has endured a bumpy uptrend since bottoming out at $14.04 a share back on 10/4/2011; notice how this ETF has been climbing higher along a rising support line, although it only recently climbed back over its 200-day moving average (yellow line) in February of this year. This ETF has considerable resistance right around $17.80 a share seeing as how it has failed to summit this level on several occasions over the past few months; notice how EWU tried, and failed, to establish support above the $17.80 level on 3/1, 3/19, and most recently on 4/2/2012 [see Euro Drama Is Back: Trade The Range In FXE]. 

Click To Enlarge

This ETF recently bounced off its 200-day moving average, perhaps suggesting that the uptrend which started on 10/4/2011 is still in-tact. Bullish investors may wish to establish a long position at current levels given the attractive upside potential, while more conservative investors may wish to wait and see if EWU can summit the $17.80 level this time around [see also ETF Investors: What's In Your Index?]

Outlook

If the economic commentary issued with the Bank of England minutes paints an optimistic picture, U.K. equities could have the wind at their back. In terms of upside, EWU can easily climb past $17.50 a share, although caution should be exercised as it approaches $17.80 a share, seeing as how this is a major resistance level. On the other hand, if bearish pressures prevail overseas, U.K. equities could face strenuous headwinds. In terms of downside, EWU has support at $16.50 a share, while a break below this level would call for re-assessment of the ongoing uptrend [see also Which Fundamentals Are Driving Gold ETFs?]. 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.