Last week the iShares MSCI Japan Index Fund ETF (NYSEARCA:EWJ) fell through the neckline of a multi-year Head & Shoulders Top Reversal pattern. The breakdown was triggered at approximately $9.15, with EWJ closing at $8.84, the low for the week.
Volume did not confirm the bearish signal as it was at the low end of the range. However, given the shortened trading week, this is to be expected. Given the long-term nature of the pattern, this is a particularly bearish signal.
The measuring objective/target based on the price distance from the top of the head down to the neckline is approximately $6.67. Calculating the same based on the percentage change provides a slightly higher target of $6.94.
At some point EWJ will find higher support and retrace back towards resistance of the neckline. A new entry level can be watched at that point to take advantage of the follow-through to the downside.
The next support area may be around $8.67, the 61.8% Fibonacci retracement of the full rally off the March 2009 low. Below there is possible support around $7.87, the 78.6% Fibonacci retracement level. (www.etf-portfolios.com)