Buying pressures permeated the marketplace on Thursday as upbeat economic data overshadowed lackluster earnings. The S&P 500 Index briefly peered past the 1,500 level marking yet another five-year high, and ultimately settled around 1,494 as the closing bell rang. Bellwether Apple (AAPL) missed the mark and shares tumbled upwards of 12% on the day as investors expressed their concerns over the company’s growth prospects. Upbeat labor market data stole the headlines after weekly jobless claims came in at 330,000 versus the expected 360,000 [see How To Swing Trade ETFs].
New home sales data will hit the Street later today, while on the international front investors are sure to keep an eye on the latest United Kingdom GDP report. As such, our ETF to watch for the day is the Rydex CurrencyShares British Pound Sterling (FXB, A-), which may swing in either direction depending on investors’ reaction to the latest economic growth reading from the European powerhouse. Analysts are expecting for U.K. GDP to post growth of 0.2% on a year-over-year basis [see How To Invest Overseas Without Currency Risk].
FXB is currently in dangerous territory as the fund recently failed to hold its ground at a key support level. Since breaking above its 200-day moving average (yellow line) in late August of 2012, notice how this ETF oscillated within a fairly well-defined range with support coming in at around $156 a share (blue line) and resistance along the $161 level (red line). What’s worrisome this time around is that FXB was unable to rebound off support as usual; instead it managed to close underneath $160 a share, perhaps suggesting that further downside is likely over the coming days [Download 101 ETF Lessons Every Financial Advisor Should Learn].
With no major support levels in sight until the $154 mark, entering into a long position at current levels in an attempt to “pick the bottom” is very speculative and is not recommended [see King Dollar ETFdb Portfolio].
If the latest U.K. GDP report comes in better-than-expected, the pound may have the wind at its back on the day; in terms upside, the next major resistance level for this ETF lies around $158 a share. On the other hand, lackluster economic growth may invite further selling pressures; in terms of downside, the next support level comes in at around $154 a share followed by the $152 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.