Investing in exchange-traded products is one of the most effective methods of gaining exposure to specific regions around the globe. The ever-changing geopolitical landscape undoubtedly creates opportunities, and those who are paying attention to the charts have the ability to profit. In the article below we’ll take a look at the bullish chart patterns of three different country funds that could be worth adding in 2017. (For more, see: What is a Country ETF?)
Japan is known around the world for its prowess in electronic goods, but this business-friendly nation is also a global leader in manufacturing, real estate, transport and communications. Taking a look at the iShares MSCI Japan ETF (EWJ), a common fund for tracking mid and large-sized companies in Japan, you’ll notice that the fund is trading within a well-defined ascending triangle. This consolidation pattern is used by active traders for determining the beginning of the next leg in an uptrend and, in this case, most traders will likely be watching for a breakout beyond $50.89. The proximity to the support of the 200-day moving average maximizes the risk/reward scenario of the trade, and many traders will likely use it to determine the placement of their stop-loss orders ($47.76). Lastly, the recent crossover between the MACD indicator and its signal line will likely be used as confirmation of the move higher, and this common technical buy signal could be what is needed to spark a rally beyond the identified resistance. (For more, see: Invest In Japan With This ETF).
The results of the U.S. Presidential election in November sent the prices of most emerging market funds lower, and Brazil was no exception. Generally speaking, active traders love waiting on the sidelines for opportunities to present themselves, and the pullback toward the long-term support of the 200-day moving average created an ideal buying scenario. As you can see from the chart of the iShares MSCI Brazil Capped ETF (EWZ), the 200-day moving average provided support on each attempted pullback in 2016 and the most recent bounce higher pushed the price beyond the resistance of the 50-day moving average, which suggests that the momentum is undoubtedly in favor of the bulls. The upward-sloping MACD indicator and its recent cross above the zero line is a common technical buy signal, and many will use this as confirmation of a move higher, and they likely be watching for a move back toward the swing high of $38.02. From a risk management perspective, stop-loss orders will likely be set below the 200-day moving average or the dotted trendline depending on risk tolerance. (For more, see: Invest In Brazil With These ETFs).
One of the most bullish chart patterns anywhere in the public markets can be found on the chart of the iShares MSCI Australia ETF (EWA). Taking a look at the chart below, you can see that the price has recently broken above the resistance of a well-defined ascending triangle. The close above the dotted trendline combined with the surge in volume and crossover between the MACD and its signal line is a clear technical buy sign. Based on the height of the pattern, traders will likely set their target prices near $23.61. Most active traders will likely set their stop-losses below the sloping trendline or the 200-day moving average ($19.61) depending on their risk tolerance. (For more, see: Analyzing Chart Patterns: Triangles).
The Bottom Line
Analyzing chart patterns on country-specific exchange-traded funds such as those discussed above is an ideal method for increasing diversification and minimizing risk. The clearly identified support and resistance lines make it simple to determine the placement of buy and stop orders. Only time will tell whether or not the bulls have enough conviction to push the prices higher. (For related reading, see: 3 Emerging Market ETFs to Watch in 2017).
At the time of writing, Casey Murphy did not own shares in any of the products mentioned.