Filed Under: ,
Tickers in this Article: EWA
Investors kicked off the trading week on a bearish note as profit taking pressures swept in following the markets’ run-up to all-time-highs last week. The bulls got a whiff of better-than-expected data after ISM nonmanufacturing results came in above last month’s reading, however, hawkish comments from Dallas Fed official Fisher stole the headlines; Fisher reiterated that markets have become too accustomed to the Fed serving as a “lifeline” and that scaling back on bond repurchases should be expected .

Our chart to watch for the day is the iShares MSCI Australia ETF which will look to resume its rebound following the latest Reserve Bank of Australia interest rate decision. Analysts are largely expecting for the RBA to cut rates to 2.50% from 2.75% currently, although the commentary after the decision itself may spark a different reaction among traders in the currency market.

Chart Analysis

Consider EWA’s one-year daily performance chart below. This ETF has staged an encouraging rebound over the past month following its steep correction since  it peaked at $28.15 a share in late April of this year. EWA has snapped back higher in recent weeks as bargain shoppers have started to pile into this beat down foreign equity fund; despite the potential for a trend reversal here, it’s worth noting that EWA remains in a downtrend, and as such, we advise utilizing a tight stop-loss for those eager to jump in long .

Click to EnlargeIn addition to the intermediate-term downtrend at hand, EWA is also rubbing right against its 50-day moving average (blue line), which it failed to summit last week .

Outlook

If the latest commentary from the RBA following the rate decision strikes an optimistic tone with investors, EWA should have the wind at its back; in terms of upside, this ETF must settle above stiff resistance at the $24 level. On the flip side, a discouraging economic outlook will likely sink Australian stocks; in terms of downside, EWA has immediate support around $23 a share followed by the $22 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

Disclosure: No positions at time of writing.

comments powered by Disqus

Trading Center