Over the last year four European markets – Spain, Italy, Belgium and France – have outperformed the S&P 500. With pullbacks in June, it begs the question of whether they are still good good buys. (For related reading, see: Why Europe's Equities Are Worth Cheering For.)

The iShares MSCI Spain Index (EWP) has been a star performer over the last year, up almost 54%. The S&P 500 SPDR (SPY) is up just over 22%. The Spanish ETF looks strong, and is moving within an upward sloping trend channel since the start of the year. The price continues to make higher lows and higher highs, offering no signs that the uptrend is in danger. A recent pullback to $42.35, and a close above $43 on July 1, presents a good buy point with a stop below the $42 trend channel bottom. The initial target is $45.50 based on the channel, but over the long-term this could be exceeded. On the weekly chart there has been a major trend reversal, and further resistance isn't likely until $50 if the initial target is surpassed.

The iShares Italy Index (EWI) ETF is up 47% over the last year. The price is heading into a resistance area (weekly chart) from $18.50 up to $20. That could cause some trouble for the ETF in the short-term, but overall a new uptrend began in 2012 and it is likely to continue to play out for some time. That uptrend should be able to push the price beyond the resistance area, eventually. A pop higher off the short-term trendline ($17.20) indicates there is still buying interest, but the June high was only marginally higher than the highs seen in April so the trend strength has weakened. Pullbacks to the $16 to $15 region present long-term buying opportunities, with a stop below $14.50 and targets near $21. This target is close to the 2009 high of $21.77. Shorter term, the price is still making higher highs and higher lows, so buying near current levels, with a stop below $17.20 sets up a trade with a target between $18.75 and $19. (For related reading, see: Using A Valid Trendline.)

The iShares MSCI Belgium Investable Market Index (EWK) is up almost $27 over the last year. Since May it has been moving within a triangle pattern. A breakout lower indicates a deeper pullback, while a break above the pattern signals another wave higher. A rally above $17.60 is an early indication the next up-wave is underway, and confirmation comes with a move beyond the June highs at $17.73 (unadjusted). Due to the massive decline in 2008 there is very little technical resistance until $24. A drop below $17, on the other hand, may set-up a larger correction, which still presents a buying opportunity for longer-term traders. Any price between $14 and $12.50 is a good buy, with a target near $24 and a stop below $10.

The iShares MSCI France Index (EWQ) is up just over 24% the last year. The long-term trend remains strong, as the price rallies within a trend channel going back to the start of 2013. Short-term, the price gapped below minor support at $29.75 on June 25, but has so far managed to hold above support at $28.75. Buying the ETF in the middle of the channel isn't ideal. Waiting for a pullback toward the low of channel presents a better reward to risk ratio. $28 to $26.75 is a buy zone, with a stop below the February $26.41 low. If the channel continues to hold the target is $32. On the weekly chart there is minimal resistance until $36, for those seeking a longer-term trade.

The Bottom Line

Spain, Italy, Belgium and France have already seen great returns in the last year, but still appear technically strong. While waiting for a pullback may prove prudent when specified, overall the trends remain up so trades should be aligned with that. These ETFs have outperformed over tha last year, but doesn't mean they will outperform this year. This is why stops are used to control risk, as conditions can change at any time. The ETFs also reflect foreign markets and therefore are prone to gaps in price from one trading day to the next. Manage position size so that a single loss doesn't significantly draw down the trading account.

Related Articles
  1. Mutual Funds & ETFs

    Mutual Funds Vs. ETFs: European Equities

    Find out which one offers the easiest, most cost effective options.
  2. Economics

    India: Why it Might Pay to Be Bullish Right Now

    Many investors are bullish on India for all the right reasons. Does it present an investing opportunity?
  3. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  4. Investing Basics

    Building My Portfolio with BlackRock ETFs and Mutual Funds (ITOT, IXUS)

    Find out how to construct the ideal investment portfolio utilizing BlackRock's tools, resources and its popular low-cost exchange-traded funds (ETFs).
  5. Personal Finance

    5 Places Where Your Travel Dollar Goes Furthest

    The dollar is pretty strong right now, but where is it strongest? Canada? South Africa? Europe? Here are five places to travel to right now on a budget.
  6. Stock Analysis

    6 Risks International Stocks Face in 2016

    Learn about risk factors that can influence your investment in foreign stocks and funds, and what regions are more at-risk than others.
  7. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  8. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  9. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  10. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
RELATED FAQS
  1. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
  2. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  3. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  4. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  5. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  6. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center