Equity markets were mixed on Tuesday as tensions remain high with investors awaiting for a concrete plan of action from Euro zone leaders. On the home front, U.S. consumer confidence came in better-than-expected, sending the Dow Jones Industrial Average higher by 0.28% for the day, while the Nasdaq lagged behind, shedding 0.47% on the day. Crude oil inched higher by over 1% for the day, with futures prices settling just below $100 a barrel. Gold was a bit more conservative, tacking on minimal gains and settling near $1,720 an ounce as the trading session drew to a close.
Canada’s third-quarter GDP is slated to come out later today, shifting the spotlight onto the iShares MSCI Canada Index Fund (EWC) for the day. Analysts are expecting for growth to come in at 2.7% year-over-year, which is a modest improvement from the previous reading of 2.4%. EWC may see an increase in trading activity as investors scramble to move in and out of positions after the latest economic report hits the street.
This ETF has endured a long and painful correction since topping out at $34.57 a share on 4/6/2011 and breaking below its 200-day moving average (yellow line) at the start of August. EWC has been brutally beat down alongside many other equity funds as ongoing Euro zone debt woes have paved the way for volatile trading and rampant profit taking. This ETF has considerable support between the $24 and $25 mark, seeing as how it held its head above this level on 10/4/2011 and once again on 11/25/2011 [see EWC Charts].
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Getting in long at current levels is quite lucrative since EWC is trading right near the bottom of its trading range, thus presenting investors with terriffic upside potential [see EWC Returns]. Nonetheless, establishing a long position is still quite speculative seeing as how EWC is still trading below its 200-day moving average.
If Canadian GDP surprises to the upside, investors may find themselves in a buying frenzy as the nation’s economic outlook improves [see Three Country ETFs That Could Benefit From Triple-Digit Oil]. Likewise, EWC may surge back above $27 a share, while a disappointing economic report could very easy spark a sell-off. In terms of downside, EWC has support at $25 a share, while a break below this level would be worrisome since the next level of support doesn’t come in until the $24 mark. If EWC regains bullish momentum over the coming days, short-term traders ought to consider taking profits at $28 a share, seeing as how this is a key resistance level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.
Disclosure: No positions at time of writing.
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