Country exchange-traded funds (ETFs) are used to invest in a specific foreign country. The ETF, while traded in the U.S., may be comprised solely of foreign stocks, or it may include alternative investments, such as commodities or foreign currency. It is a simple way to trade and gain exposure to foreign equities.

Three country ETFs have been in strong uptrends, and a recent pullback could provide an opportunity to get in before the next wave to the upside begins. Of course, this assumes that the uptrend will continue, but with little signs of weakness so far, the technicals still favor the bulls.

The iShares MSCI Taiwan Capped ETF (EWT) has been steadily rising, respecting a rising trendline all year. After hitting a high of $37.49 on Aug. 8, the price has pulled back to the rising trendline, currently intersecting near $36. Traders should consider a purchase if the price rallies back above $36.50. Alternatively, if the price drops in the short term, traders could consider a purchase between $36 and $35.60. Based on the channel in which the price is moving, the next upside target is $37.75 – the top of the channel. Traders could place a stop-loss order below the most recent swing low that has occurred just prior to entry. For example, if the price rallies above $36.50, the most recent swing low would be $35.96. If the price keeps declining in the short term, the most recent swing low would be $35.30 (July). (For more, see: Taiwan ETF Hits a New 52-Week High.)

Technical chart showing the iShares MSCI Taiwan ETF (EWT) near support in an uptrend

The Wisdom Tree India Earnings Fund (EPI) has also seen a strong uptrend since the start of 2017. After hitting a high fo $26.90 on Aug/ 7, the price has pulled back toward the rising trendline at $25.30. The price already bounced off the trendline area, trading at $26.10 as of Aug. 16. Not wanting to chase the price, some patience is required in waiting for the price to move closer to the trendline before buying. If the price falls to near $25, a stop-loss could then be placed below $24.20. The upside target is $27.30, just above the former high. (See also: India: An Emerging Market for the Long Term.)

Technical chart showing the WisdomTree India Earnings Fund (EPI) near support in an uptrend

The iShares MSCI Mexico Capped ETF (EWW) pulled back to its rising trendline in August after hitting a high of $57.72 a couple of weeks earlier. The trendline intersects just below $56, where the price stalled for three trading sessions between Aug. 9 and Aug. 11. As of Aug. 16, the price is trading at $57.11. Once again, it will take some patience in seeing if another buying opportunity occurs near $56. Whether another buying opportunity occurs or not, the upside target is $59 to $59.50. A stop-loss could be placed below the recent low of $55.47, although it may be wise to consider giving the trade a bit more room in case the price moves back to the entry point and wiggles around for a week or two (which is quite common). (For more, see: Rebounding Peso Powers Mexico ETF.)

Technical chart showing the iShares MSCI Mexico Capped ETF (EWW) near support in an uptrend

The Bottom Line

These country ETFs are in strong uptrends, and there isn't any significant technical evidence to suggest that the uptrend is over yet. Therefore, the pullbacks remain buying opportunities. When the price pulls back to a trendline, it is a possible trade area, but traders should make sure that the potential reward outweighs the risk and that they aren't trying to catch a falling knife.

For example, EPI saw a strong drop during the pullback, which is cause for some concern, but if the price declines again and stabilizes near the trendline, then the selling may be losing momentum. That is a good thing for the bulls. In all trading, all we can do is put the odds in our favor and risk only a small percentage of account capital on any single trade. (For additional reading, check out: Top 10 Factors When Buying Country ETFs.)

Charts courtesy of Disclosure: The author does not have positions in the ETFs  mentioned.