The bulls took a breather yesterday as profit taking pressures resurfaced due to the S&P 500′s stellar run-up of more than 14% year-to-date. Even after better-than-expected U.S. employment data hit The Street, sellers didn’t hesitate to swoop in and lock in profits ahead of the final trading day of the week; nonetheless, bearish sentiment was contained after weekly jobless claims came in at 323,000, marking a solid improvement over last week’s reading of 327,000 [see also The Cheapest ETF For Every Investment Objective].
Our ETF to watch for the day is the iShares MSCI Canada Index Fund (EWC, B-) as it could experience volatile trading following the release of the latest monthly Canadian employment data. Analysts are expecting for Canada’s unemployment rate to hold steady at 7.2% while jobs are expected to increase by 15,000, which would mark a healthy improvement in the nation’s labor market recovery following last month’s contraction of 54,500 jobs [see also Rapid Growth Markets Your Portfolio Needs].
Consider EWC’s one-year daily performance chart below. Unlike major U.S. equity indexes, which are sitting on all-time highs, EWC has been stuck in a dismal range since September of last year; since peaking at $29.63 a share, EWC has failed to summit the $29.50 level (red line) on several occasions. This ETF recently found support just below $27 a share, which is noteworthy seeing as how it previously managed to stage a multi-week rebound when held above this same support level in mid-November of 2012 [see The 5 Most Important Chart Patterns For ETF Traders].
While EWC’s rebound over the last month is certainly steep and impressive, there are some bearish signposts for this fund from a technical perspective; notice how this ETF failed to establish support above $28.50 a share (blue line) earlier this year throughout most of March. As such, we advise conservative investors to consider waiting until this ETF establishes definitive support above $28.50-$29 a share, depending on individual risk preferences, before jumping in long [see How To Take Profits And Cut Losses When Trading ETFs].
Upbeat employment data could be the much needed fundamental catalyst that propels EWC passed resistance; in terms of upside, this ETF has near-term resistance at $28.50 a share followed by major resistance at the $29.50 level. On the other hand, disappointing employment data can inspire profit taking for Canadian equities. In terms of downside, this ETF has near-term support at $28 a share followed by the $26.50 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.