Investors in the U.S. looking to broaden their portfolios beyond North America should look at mid-to-large cap equities in developed markets like Europe, Australia, Asia and other parts of the Far East. In the article below, we’ll take a look at the charts and try to identify where there is the greatest opportunity. (See also: Evaluating Country Risk For International Investing.)

 iShares MSCI EAFE ETF

When it comes to investing in the developed markets above, the most common choice for most investors is the iShares MSCI EAFE ETF (EFA). This fund is comprised of 932 holdings from Japan, United Kingdom, France Germany, Switzerland and many others across regions mentioned above. Taking a look at the chart below, you can see that the downtrend is in the process of reversing. The recent crossover between the 50-day and 200-day moving averages is a clear long-term technical buy sign that is suggesting this could only be the beginning of a prolonged move higher. From a risk management perspective, traders will likely set their stop-loss orders directly below the support of the 50-or 200-day moving averages, which are trading at $57.21 and $56.23 respectively. (See also: Go International With Foreign Index Funds.)

Australia

When it comes to investing in developed markets outside of the United States, it appears that Australia is well positioned for a move higher. Taking a look at the chart of the iShares MSCI Australia ETF (EWA), which was developed by its managers to provide investors with comprehensive coverage of the Australian stock market, you can see that the price has recently broken out of a clearly defined ascending triangle pattern. This bullish chart pattern is one of the most commonly used by active traders because of its clearly identified support and resistance levels. In this case, most traders would expect the uptrend to continue until the price closes below the combined support of the lower trendline, the 50-day and 200-day moving averages. In case you are new to trading, target prices are generally set by adding the height of the pattern to the breakout price, which in this case puts the bull’s sights on the $25 mark. (See also: These ETFs are Breaking Out of Chart Patterns Now.)

Japan

Another nation that looks poised for future growth is Japan. Taking a look at the chart of the iShares MSCI Japan ETF (EWJ), you can see that the pattern looks very similar to those shown above, which isn’t surprising given Japanese equities make up 23.51% of the EFA fund.  At this stage, bullish traders will look to place their buy-orders as close to the trendline as possible to make the most of the risk/reward setup. Stop-loss orders will likely be set below the 200-day moving average, which is currently trading near $11.63. (See also: 2 ETFs for a Potential Japanese Rally.)

The Bottom Line

Many North American investors are starting to look overseas to diversify their portfolios. While many will instinctively flock to the emerging markets, the bullish chart patterns on many of the developed markets are suggesting that they deserve a closer look. The recent pullbacks shown on the charts above are now providing very reasonable risk/reward setups and a bounce higher across the various regions mentioned could very well be in the cards over the coming weeks. 

 

 

 

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