The corrective moves we’ve been tracking in some international stock ETFs appear to be nearing their end. This post updates our forecast for the iShares MSCI Italy Capped ETF (NYSEARCA: EWI) which is following the plan we described in January and may soon provide an opportunity to catch a strong reversal.
Six months ago we noted that support would put a temporary halt to the decline that had persisted through most of 2018. The Elliott wave count down from the January 2018 high appeared to be a complete set of five moves.
Treating the decline as 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 levels to watch. The chart below shows a refinement of those resistance levels which are now quite nearby.
For a reversal we’d like to see the Lomb periodogram move a bit farther 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.
Cover photo: Fountain in St. Peter's Square, Vatican City
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Note that price recently tested the first such resistance at 28.83, which represents the earliest point to watch for a reversal. However we still believe there is a good chance that 30.22 will be tested later this year before a more serious breakdown.
A very preliminary target for the next big decline sits near 17.41, which would represent approximately a 40% decline.
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.