Stocks continued their ascent on Tuesday thanks to upbeat economic data from China. Investors rejoiced over better-than-expected industrial production data as well as retail sales, sending a wave of optimism across emerging markets as well as developed ones, although industrial metals surprisingly didn’t take part in the rally. At home, Syria and the looming Fed meeting remain at the forefront and, as such, volatile trading is likely to persist over the coming weeks [see 3 Market Valuation Indicators ETF Investors Must Know].
Our chart to watch for today is the iShares MSCI New Zealand Capped ETF (ENZL, A-), which may gap in either direction at the opening bell as investors react to the overnight interest rate decision. Analysts are expecting for the Reserve Bank of New Zealand to hold rates steady at 2.50%, although commentary after the rate decision itself could still spark a volatile reaction in the equity market.
Consider ENZL’s one-year daily performance chart below. This ETF was enjoying a steady uptrend until it peaked at $39.66 a share in late April and proceeded to sink below its 200-day moving average (yellow line). Since then, ENZL has had a number of failed attempts at regaining its footing above $36 a share; notice how this ETF failed to summit the same resistance level (red line) in late July and mid-August despite launching off a rising support level [see Visual Guide To Major Index Returns By Year From 1970].
What’s encouraging this time around is that ENZL has managed to peer above this resistance level, and more importantly, this breakout has been accompanied by above-average buying volume. As such, this uptrend should continue over the coming days, although a slight pullback could follow as it nears resistance around $37 a share [Download 101 ETF Lessons Every Financial Advisor Should Learn].
If the latest commentary from the Reserve Bank of New Zealand strikes an optimistic tone among investors then equity markets overseas will likely rally; in terms of upside, ENZL has upcoming resistance around $37 a share followed by the $39 level. On the other hand, bearish commentary can spark selling pressures in ENZL; in terms of downside, this ETF has support at $35 a share followed by the $33 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.