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Japan ETF Could Have Chart Problems


There is no denying Japan exchange traded funds have, thus far, delivered strong returns relative to other non-U.S. developed market funds this year.

It is hard to quibble with the returns offered by an ETF such as the iShares MSCI Japan ETF (EWJ) , the largest Japan ETF by assets. EWJ is up 23.3% year-to-date and has hauled in over $5.8 billion in assets, making it the third-best ETF by that metric this year. [Investors Still Like Japan ETFs]

EWJ and rival Japan ETFs have been buoyed by a weak yen and Prime Minister Shinzo Abe’s efforts, also known as Abenomics, to reinvigorate the world’s third-largest economy while boosting inflation.  [Evaluating Japan ETFs]

However, an interesting scenario has emerged over the past 90 days. EWJ has noticeably lagged the iShares MSCI EAFE ETF (EFA) . Over that time, EFA is higher by 10.2% compared to gain of 6.6% by EWJ.

At least one technical analyst sees the potential for a pullback in EWJ.

“EWJ has been having some difficulty with resistance at $12 to $12.20. While the Japan ETF has been making higher lows – keeping the uptrend alive, it’s been unable to make higher highs which put it into question whether buyers can keep EWJ from making a trend change,” writes Andrew Thrasher for Trader Planet.

EWJ’s 52-week high is in the $12.40 area and was made in May. Since then, the ETF has managed several closes above $12, but has been unable to stick above that important price point. On October 22, EWJ closed at $12.15, but on Tuesday the ETF closed at $11.97, marking the third time since last month EWJ has closed above $12 only to be below that level within a matter of days.

Although EWJ is not currency hedged fund, the ETF could benefit from some yen weakening. Over the past month, EWJ is up 0.4% while the CurrencyShares Japanese Yen Trust (FXY) is flat.

iShares MSCI Japan ETF

ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.