U.S. stocks entered into green territory on Thursday after enduring a two day profit taking wave on Wall Street. The bulls prevailed despite mixed economic data releases on the day; domestic weekly jobless claims disappointed after a greater-than-expected number of people filed for unemployment benefits, while upbeat China trade data encouraged investors that the slowing growth trend overseas could soon reverse [see also The Best Dividend ETF For Every Investment Objective].
Our chart to watch for today is the iShares MSCI Canada ETF (EWC, C+), which will come into focus as investors digest the latest Canadian employment report. Analysts are expecting for Canada’s unemployment rate to hold steady at 7.1% while jobs are expected to have increased by 10k for the month of July.
Consider EWC’s one-year daily performance chart below. EWC has endured a very choppy trading year; notice how this ETF has traded lower within a fairly well-defined channel (red lines) since peaking at $29.63 a share in mid-September of 2012. EWC has been posting lower-highs and lower-lows all year, showcasing the largely uncertain outlook for Canada’s economy while the bulls at home have enjoyed a largely uninterrupted march to all-time highs across major indexes [see How To Take Profits And Cut Losses When Trading ETFs].
Although it is encouraging to see EWC rebound off the $27 level, this ETF is still in a downtrend as evidenced by the fact that it’s trading below the 200-day moving average (yellow line). Furthermore, EWC is also nearing the upper-resistance boundary of its longer-term channel, which means that bearish pressures could soon swoop in [see 10 Questions About ETFs You've Been Too Afraid To Ask].
If Canada’s latest employment report paints an optimistic outlook for the labor market recovery, EWC should have the wind at its back; in terms of upside, EWC will likely face stiff resistance between $28 and $28.50 a share. On the other hand, lackluster employment data may inspire another round of profit taking overseas; in terms of downside, EWC has immediate support at $27 a share followed by the $26 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.