The corrective moves we’ve been tracking in some international stock ETFs appear to be nearing their end. Both the Italy ETF and the Brazil ETF are following the plan and may soon provide opportunities to catch some strong reversals. As a reader of the free newsletter from Trading On The Mark, you’re among the first to see these charts.
When we wrote about the iShares MSCI Italy Capped ETF (EWI) in January, we noted that support had put a temporary halt to the decline that had persisted through most of 2018.
With the decline being wave (i) of an impulse emerging from a multi-year Elliott wave triangle, we predicted a corrective bounce as wave (ii) and showed the most important resistance areas to watch.
On the chart shown below, we’d like to see the Lomb periodogram move a bit into the upper reversal zone. Likewise the empirical 99-week cycle may need several more weeks to mature. Either of those developments would allow a bit more time for price to test the harmonic retracement levels we have drawn at 30.22 and possibly 31.67. Note that price is currently testing the first such resistance at 28.83, which represents the earliest point to watch for a reversal.
A very preliminary target for the next big decline sits near 17.41, which would represent approximately a 42% decline as measured from the middle resistance level. If your trading style is to jump onto the breakout, a weekly close beneath 26.00 would offer fairly good confirmation that wave (iii) has begun.
Also in January we reviewed the successful forecast that had foretold of a strong bounce in the iShares MSCI Brazil Capped ETF (EWZ). We updated that forecast in April to note the main resistance areas to watch for the next sizable decline.
Unlike our forecast for EWI, shown earlier, we don’t believe EWZ is ready to embark on a downward “third wave” but instead on a ‘c’ wave which could have much the same feel. It would represent the counterpart to wave ‘a’ that moved the fund down so quickly during the first half of 2018. Price has already tested and overcome resistance at 43.35 and 44.91, but those levels are still relevant for traders who want confirmation of the downward breakout. Meanwhile the resistance at 47.85 looks very attractive, and 50.96 could serve as a backup area to watch for the end of wave ‘b’ of (b).
Note also how the Lomb periodogram is solidly in the reversal zone for Brazil. It looks more mature than the calculation does for the Italy ETF.
A reversal from near 47.85 would imply support targets near 36.69 and 30.17. Declining wave ‘c’ of (b) might even reach 25.51 or 19.62.
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Good fortune to you in your trading!
— Tom and Kurt at Trading On The Mark