Friday’s ETF Chart To Watch: MSCI Canada Index Fund (EWC)

by on March 1, 2013 | ETFs Mentioned:

Selling pressures permeated the marketplace as the dreaded sequester became a reality, but major equity indexes remained remarkably resilient given the fairly upbeat U.S. GDP revision. Amid the spending cut fears on Wall Street, weekly employment data kept confidence levels elevated; the latest weekly jobless claims figure showed that 344,000 people had filed for unemployment benefits, marking a healthy improvement from last week’s reading of 366,000 filings [see How To Swing Trade ETFs].

Investors will digest several key reports later today on the home front, including consumer spending and sentiment data, ISM and construction spending, as well as motor vehicle sales. Amid the flurry of releases, some may wish to re-focus their attention to the north as Canada’s GDP will also take center stage. As such, our ETF to watch for the day is the iShares MSCI Canada Index Fund (EWC, B), which may experience volatile trading depending on the latest economic growth data. Analysts are expecting for Canada’s quarterly GDP to post growth of 0.7% versus the previous reading of 0.6% [see also Free Report: How  To Pick The Right ETF Every Time].

Chart Analysis

EWC appears to have completed a healthy correction since failing to summit the $29.50 level (red line) throughout the second-half of January and into February of this year. This ETF tanked lower alongside major equity indexes last week, but it appears to have regained its footing above the $28 level judging by its above-average buying volumes yesterday. What’s also noteworthy is that EWC previously bounced off this level back in early December of 2012, and managed to rebound higher in the following weeks [see How To Take Profits And Cut Losses When Trading ETFs].

Click to Enlarge

Despite EWC’s current bullish setup, there are some bearish indicators to consider; first and foremost, this ETF has deviated from its longer-term uptrend (blue line), which may suggest a reversal is in order. Second, this ETF has failed to summit $29.50 a share (red line) on multiple occasions during 2012 and 2013 [see The 5 Most Important Chart Patterns For ETF Traders]. 

Outlook

If Canada’s GDP report comes in above expectations, EWC may have the wind at its back on the day; in terms of upside, this ETF has immediate resistance between $29 and $29.50 a share. On the other hand, disappointing economic growth data could spur profit taking; in terms of downside, this ETF has immediate support at $28 a share followed by the $27 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.