U.S. stocks entered into green territory on Thursday after enduring a two day profit taking wave on Wall Street. The bulls prevailed despite mixed economic data releases on the day; domestic weekly jobless claims disappointed after a greater-than-expected number of people filed for unemployment benefits, while upbeat China trade data encouraged investors that the slowing growth trend overseas could soon reverse [see also The Best Dividend ETF For Every Investment Objective].
Our chart to watch for today is the iShares MSCI Canada ETF (EWC, B), which will come into focus as investors digest the latest Canadian employment report. Analysts are expecting for Canada’s unemployment rate to hold steady at 7.1% while jobs are expected to have increased by 10k for the month of July.
Chart Analysis
Consider EWC’s one-year daily performance chart below. EWC has endured a very choppy trading year; notice how this ETF has traded lower within a fairly well-defined channel (red lines) since peaking at $29.63 a share in mid-September of 2012. EWC has been posting lower-highs and lower-lows all year, showcasing the largely uncertain outlook for Canada’s economy while the bulls at home have enjoyed a largely uninterrupted march to all-time highs across major indexes [see How To Take Profits And Cut Losses When Trading ETFs].
Click to Enlarge
Although it is encouraging to see EWC rebound off the $27 level, this ETF is still in a downtrend as evidenced by the fact that it’s trading below the 200-day moving average (yellow line). Furthermore, EWC is also nearing the upper-resistance boundary of its longer-term channel, which means that bearish pressures could soon swoop in [see 10 Questions About ETFs You've Been Too Afraid To Ask].
Outlook
If Canada’s latest employment report paints an optimistic outlook for the labor market recovery, EWC should have the wind at its back; in terms of upside, EWC will likely face stiff resistance between $28 and $28.50 a share. On the other hand, lackluster employment data may inspire another round of profit taking overseas; in terms of downside, EWC has immediate support at $27 a share followed by the $26 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.
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