The bulls took a breather yesterday as profit taking pressures resurfaced due to the S&P 500′s stellar run-up of more than 14% year-to-date. Even after better-than-expected U.S. employment data hit The Street, sellers didn’t hesitate to swoop in and lock in profits ahead of the final trading day of the week; nonetheless, bearish sentiment was contained after weekly jobless claims came in at 323,000, marking a solid improvement over last week’s reading of 327,000 [see also The Cheapest ETF For Every Investment Objective].
Our ETF to watch for the day is the iShares MSCI Canada Index Fund (EWC, B) as it could experience volatile trading following the release of the latest monthly Canadian employment data. Analysts are expecting for Canada’s unemployment rate to hold steady at 7.2% while jobs are expected to increase by 15,000, which would mark a healthy improvement in the nation’s labor market recovery following last month’s contraction of 54,500 jobs [see also Rapid Growth Markets Your Portfolio Needs].Chart Analysis
Consider EWC’s one-year daily performance chart below. Unlike major U.S. equity indexes, which are sitting on all-time highs, EWC has been stuck in a dismal range since September of last year; since peaking at $29.63 a share, EWC has failed to summit the $29.50 level (red line) on several occasions. This ETF recently found support just below $27 a share, which is noteworthy seeing as how it previously managed to stage a multi-week rebound when held above this same support level in mid-November of 2012 [see The 5 Most Important Chart Patterns For ETF Traders].
While EWC’s rebound over the last month is certainly steep and impressive, there are some bearish signposts for this fund from a technical perspective; notice how this ETF failed to establish support above $28.50 a share (blue line) earlier this year throughout most of March. As such, we advise conservative investors to consider waiting until this ETF establishes definitive support above $28.50-$29 a share, depending on individual risk preferences, before jumping in long [see How To Take Profits And Cut Losses When Trading ETFs].Outlook
Upbeat employment data could be the much needed fundamental catalyst that propels EWC passed resistance; in terms of upside, this ETF has near-term resistance at $28.50 a share followed by major resistance at the $29.50 level. On the other hand, disappointing employment data can inspire profit taking for Canadian equities. In terms of downside, this ETF has near-term support at $28 a share followed by the $26.50 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
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Disclosure: No positions at time of writing.