The EWJ Soared above Its Moving Averages in the Past Month
How the EWJ ETF Provided Positive Returns in October
The EWJ ETF’s moving averages
On October 9, the iShares MSCI Japan ETF (EWJ) closed at around $12.1, above its 100-day moving average of $11.96 and below its 50-day moving average of $12.27 and 20-day moving average of ~$12.4. This revealed a change in the trend.
Bank of Japan report
As you can see from the graph above, the EWJ ETF has been soaring above its moving averages. On October 9, the Bank of Japan came out with its monthly report regarding economic and financial development, where it stated that Japan will grow with moderate speed and that the government will take steps for fiscal development.
On October 16, the EWJ ETF closed at $12.28, above its 100-day and 50-day moving average of $11.96 and $12.27 respectively.
What do moving averages indicate?
The moving average is the average stock price over a certain period of time. It’s a trend-following indicator, also known as the lagging indicator, because it’s calculated based on past prices.
When the stock price crosses the moving average, it creates a change in the trend. If the stock price crosses the longer-term moving average, meaning the 100-day moving average, then it indicates an uptrend where the moving average is a strong support point. When the stock price crosses the short-term moving averages, either the 50-day or 20-day moving average, it indicates a short-term uptrend. In that short-term uptrend, it will maintain the 50-day and 20-day moving average as a first and second support point.
Support points are the points where the buyers will not allow the price to go down, or the point where more buyers are ready to buy compared to the sellers.
As the EWJ ETF tracks the performance of Japanese equity, it’s invested in large capitalization stocks such as Toyota (TM), Mitsubishi UFJ Financial Group (MTU), Sumitomo Mitsui Financial Group (SMFG), Honda (HMC), and SoftBank Group (SFTBY).
Next, we will analyze the ETF from a statistical point of view.
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