A Technical Look at the French ETF: EWQ
According to a Reuters report, credit rating agency Fitch has confirmed its top notch ‘AAA’ credit rating on the French Economy. Over the current fiscal year, the French economy has been on the radar of all the rating agencies while facing rating downgrade from the other two (Standard & Poor and Moody’s), earlier this year (see 3 Emerging Market ETFs Protected from Global Events).
Stronger European economies like France and Germany have been under constant pressure to bail out their debt plagued neighbors which has caused had a massive impact on their own balance sheet. As a result, the economy has been downgraded twice in the current fiscal year, first by S&P and later on, less than a month ago, by Moody’s Investors services.
However, this has not led the French ETF down by any standard as the French ETF EWQ is looking pretty strong. In fact, analyzing quarterly performance of the French ETF reveals that it had performed the best in the 1st quarter of Fiscal 2012 – the quarter in which it was downgraded by S&P. EWQ added about 12% in the quarter (see France's Credit Downgrade: How Does it Impact the French ETF?).
Interestingly the ETF is showing similar characteristics on its second downgrade this quarter. EWQ is up by almost 8% quarter till date in the final quarter of this fiscal and exhibits impressive charts.
On December 5th EWQ has surpassed its previous 52-Week high level of $22.87 from its March 2012 lofty levels. EWQ has surpassed its 50 Day Moving Average line (Blue) after a week of range bound trading leading up to its rating downgrade.
However, it is quite impressive to see that the ETF has rebounded from its 100 and 200 Day moving average lines (Red and Green Lines respectively) indicating strong support.
During the same time its 100 Day Moving Average line had surpassed the 200 Day moving average line indicating a bullish reversal and confirming the trend are two very important factors.
1) The ETF has been making higher highs on 2 consecutive occasions after 5th December 2012, to be precise $23.04 on 11th December and $23.26 on 12th December, 2) The 100 Day Moving average line is upward rising making a bullish case for the French ETF (see more in the Zacks ETF Center).
Still, the ETF is near overbought territory at the present moment, with the Relative Strength Index (:RSI) showing a reading of 69. This makes a case for a minor technical correction in the following few trading sessions which has probably started as indicated by yesterday’s trading session when the ETF slumped a tad to close at $23.04.