Investors across North America have tended to focus their attention on domestic markets over the past couple of years. However, long-term ascending triangles and clear levels of resistance on several key markets in Europe suggest that active traders may want to expand their focus to include countries such as France and Germany.
iShares MSCI Eurozone ETF (EZU)
Niche exchange-traded funds (ETFs) such as the iShares MSCI Eurozone ETF (EZU) are often looked to as the product of choice by those investors interested in gaining exposure to a specific geographic region. For those unfamiliar, the EZU ETF comprises 249 holdings ranging from large- and mid-cap equities from countries within Europe that use the euro as their official currency. Taking a look at the chart below, you'll notice that a well-defined ascending triangle has formed over the past year. This bullish chart pattern is often found during a period of consolidation.
The reason it is of specific interest to followers of technical analysis is because the recent break beyond the resistance, as shown by the blue circle, is regarded as a buy sign that could be used to mark the beginning of the next leg higher. Based on the height of the pattern, traders will likely set their 12-month target prices near $45. From a risk-management perspective, stop-loss orders will most likely be placed below the combined support of the ascending trendline and the 200-day moving average, which are currently trading at $38.18.
iShares MSCI France ETF (EWQ)
One of the European countries that could be of specific interest to active traders over the coming months is France. As you can see from the chart of the iShares MSCI France ETF (EWQ) below, an ascending triangle has recently formed, and the price has managed to move above the resistance of the horizontal trendline, as shown by the blue circle.
In terms of risk management, you'll see that the chart pattern looks similar to EZU, which suggests that traders will look to trade it in a similar manner – determining the placement of buy and stop orders. On the other hand, the country-specific exposure offered by EWQ will likely make it the preferred option for those traders looking for targeted exposure. Lastly, those looking to minimize their risk will likely opt for EZU because it offers an added layer of diversification.
iShares MSCI Germany ETF (EWG)
Germany is often regarded as the bellwether when it comes to analyzing and forecasting the future trends of the Eurozone. As you can see from the chart of the iShares MSCI Germany ETF (EWG) below, the price has recently moved above a key level of resistance, as shown by the blue arrow.
The move above the previous swing high is a technical buy signal and has recently triggered a crossover between the 50-day and 200-day moving averages. This type of moving average crossover is known as the golden cross and is one of the most popular long-term signals used to mark the beginning of a long-term uptrend.
The Bottom Line
Trend traders often spend countless hours scouring the markets for well-formed triangle patterns and key levels of support and resistance that can be used in determining the placement of their orders. As discussed above, the Eurozone seems as though it could be the region of the world that captures traders' attention in the final months of 2019.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.