Tuesday’s ETF Chart To Watch: MSCI Germany Index Fund (EWG)

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The bears swept in Monday morning as developments in the eurozone over the weekend ignited worries, and profit-taking pressures quickly followed. Traders took some profits off the table after it was reported that European policymakers could impose a tax on Cypriot bank deposits, which inevitably sent a wave of worry across the debt-burdened currency bloc [see Visual History Of The Dow Jones Industrial Average].

The iShares MSCI Germany Index Fund (EWG, A-) will come into the spotlight later today as investors digest the latest German ZEW Survey results. Analysts are expecting economic sentiment in the European powerhouse to come in at 48.1, marking a slight deterioration from last month’s reading of 48.2.

Chart Analysis

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EWG has resumed its uptrend since its correction in February of this year, however, the fund has been showing signs of struggle in recent trading sessions. Notice how this ETF failed to hold above $26 a share on February 1, 2013; since then, this ETF has tried, and failed, on multiple occasions to settle above $25.50 a share (red line). What’s worrisome is that EWG has failed to summit this resistance level (red line) even after it rebounded off a rising support level (blue line) at the start of March [see How To Swing Trade ETFs].

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EWG’s bull run is undeniable as it has persisted with occasional short-lived corrections since shares bottomed out in late July of 2012. Nonetheless, we advise those eager to jump in long at current levels to consider waiting until this ETF has established definitive support above $26 a share [see How To Take Profits And Cut Losses When Trading ETFs].

Outlook

If the latest ZEW Survey results come in better than expected, EWG may finally see the much-needed catalyst necessary to propel it past resistance; in terms of upside, this ETF has major resistance between $25.50-$26 a share. On the other hand, weaker-than-expected economic sentiment could inspire profit-taking; in terms of downside, this ETF has major resistance near the $24 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

Follow me on Twitter @SBojinov.

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Disclosure: No positions at time of writing.

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