Stocks kicked off the week on a very bullish note as upbeat exports data out of China brought the bulls back from the sidelines. Adding to the list of good news is the fact that U.S. military involvement in Syria has not progressed, giving investors some much-appreciated breathing room when taking into account all of the uncertainty surrounding the upcoming Fed meeting [see Picture Edition: 3 Market Valuation Indicators ETF Investors Must Know].
Our chart to watch for today is the iShares China Large-Cap ETF (FXI, A-), which could experience volatile trading at the open bell as investors react to the overnight industrial production data release. Analysts are expecting for China’s industrial production figure to post an increase of 9.9% compared to last month’s reading of 9.7%.
Consider FXI’s one-year daily performance chart below. This China ETF has traded lower since the start of 2013 and it went on to sink below its 200-day moving average (yellow line) in April; since then, FXI has staged a furious rebound and it has even managed to peer above its 200-day SMA in recent days. FXI’s rally is undeniably encouraging; notice how this ETF has posted higher-highs and higher-lows since bottoming out in early July [see The Complete Visual History Of SPY].
Nonetheless, we advise conservative investors to hold off from jumping in long until FXI establishes definitive support above $38 a share; notice how this ETF previously tried, and failed, to summit the $38 level (red line) in May of this year [see 7 Rules ETF Day Traders Must Know].
If the latest industrial production data comes in better-than-expected, fears over China’s growth will likely subside and resonate well for equities overseas; in terms of upside, FXI must conquer stiff resistance around $39-$38.50 a share. On the flip side, weak industrial data can inspire heavy profit taking; in terms of downside, FXI has support around $36 a share followed by the $34 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
Follow me on Twitter @SBojinov
[For more ETF analysis, make sure to sign up for our free ETF newsletter]
Disclosure: No positions at time of writing.