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

by on January 31, 2013 | ETFs Mentioned:

Mild selling pressures swept over Wall Street on Wednesday as the bulls found it hard to hold on to profits in the face of disappointing data. Major equity benchmarks slid lower on the day as U.S. GDP missed the mark; quarterly economic growth came in at negative 0.1%, falling short of the 1.0% estimate as a cutback in government spending took its toll on the gross output figure. Elsewhere on the domestic front, the labor market continued to show steady signs of improvement after the ADP employment figure came in at 192,000, sailing past the expected figure of 173,000 jobs [Download 101 ETF Lessons Every Financial Advisor Should Learn].

Trading activity on the homefront should be quite eventful today as markets digest weekly jobless claims, personal income and consumer spending data. Investors may also turn their attention to the north as Canada releases it’s own GDP report. As such, the iShares MSCI Canada Index Fund (EWC, B) will come into the spotlight at the opening bell and may gap in either direction; analysts will look for Canada’s GDP to show expansion upwards of 1.1% and surpass last quarter’s growth reading [see also 17 ETFs For Day Traders].

Chart Analysis

While U.S. stocks continue to edge higher in 2013, Canadian equities appear to be losing steam. EWC is sitting on decent gains thus far on the year, however, it has been grinding sideways for the last two weeks, which is concerning since European and U.S. stocks (as represented by VGK and SPY, respectively) have managed to keep rising in the face of encouraging economic data. What’s even more concerning is that EWC is pumping its breaks right ahead of a major resistance level (red line); notice how this ETF has failed to summit the $29.50 level on several occasions since early March of 2012, and later again throughout September and October [see How To Swing Trade ETFs].

Click to Enlarge

Jumping into a long or short position at current levels is quite speculative and not recommended for conservative investors; positive fundamental news over the coming days can inspire a breakout past $29.50 a share for EWC, while negative news can just as easily welcome very heavy profit-taking pressures [see ETF Call And Put Options Explained].

Outlook

If the latest Canada GDP report paints an optimistic outlook, EWC may have the wind at its back for the day; in terms of upside, this ETF will face selling pressures as it attempts to settle above $29.50 a share. On the flip side, worse-than-expected GDP results could create serious headwinds for Canadian stocks; in terms of downside, this ETF has support at $28 a share. 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.