During times of heightened volatility, it is common for active traders to turn to segments of the market that are dominating the headlines such as health care, technology, and precious metals. Mostly, U.S. investors tend to focus on domestic companies due to the leading nature of most of the businesses. However, based on the charts discussed below, it appears as though now could also be an interesting time to broaden one's perspective and portfolio exposure by looking to European equities.
iShares Europe ETF (IEV)
European equities have been underfollowed in recent months due to increased focus on domestic assets in the sectors listed in the intro above. Taking a look at the weekly chart of the iShares Europe ETF (IEV) below, you can see that the price of the fund has recently risen above a key long-term level of support and resistance that has drastically influenced prices over the past couple of years.
Recent price action near $41 suggests that the bulls are in control of the momentum and that they will be betting on a continued mover higher over the weeks ahead. From a risk-management perspective, stop-loss orders will likely be placed below one of the nearby support levels in case of a sudden shift in fundamentals or market sentiment.
Nestle S.A. (NSRGY)
As the top holding of an ETF such as IEV, Nestle S.A. (NSRGY) will likely be the focus of attention for many North American investors over the weeks ahead. As you can see from the weekly chart below, the price has recently broken above a key level of resistance near $110 and has started the next leg of a major move higher.
Based on the chart, it is clear that the bulls are in control of the momentum. Stop-losses will most likely be set below the aforementioned support level in case of a sudden shift in underlying fundamentals.
AstraZeneca PLC (AZN)
Another top holding of the IEV ETF that could be worth a closer look over the weeks and months ahead is AstraZeneca PLC (AZN). As you can see from the weekly chart below, the price has recently bounced off of the support of an influential horizontal trendline and has started to make a move higher.
The chart clearly shows that the bulls are in control of the momentum. Stop-loss orders will most likely be placed below the dotted trendline or the 50-week moving average, depending on risk tolerance and outlook.
The Bottom Line
Active traders have predominantly been paying attention to domestic equities, but as the charts above have demonstrated, it could be a good time to broaden one's view and look to Europe for the next candidate for a truly diversified portfolio. The weekly charts above show that the long-term trends in Europe are clearly in the favor of the bulls and that leading stocks such as Nestle and AstraZeneca could be positioned for a major move higher.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.