How to Trade Emerging Markets After This ETF Set a Multiyear High – TheTradersWire

How to Trade Emerging Markets After This ETF Set a Multiyear High


How to Trade Emerging Markets After This ETF Set a Multiyear High

By Richard Suttmeier | October 6, 2017 — 3:47 PM EDT

The iShares MSCI Emerging Market ETF (EEM) represents 850 overseas investments heavily-weighted to China, South Korea and Taiwan. The exchange-traded fund includes popular ADRs for Chinese companies Alibaba and Baidu.

The ETF is recovering from two major bear markets. The ETF declined 40% from a high of $45.85 set during the week of Sept. 5, 2014 and a low of $27.61 set during the week of Jan. 22, 2016. This decline has been fully recovered with the ETF setting a slightly higher high of $45.98 on Oct. 5.

Investors need to be aware that this decline and recovery is within a larger bear market decline of 67% from its all-time intraday high of $55.82 set during the week of Nov. 2, 2007 to its multiyear intraday low of $18.22 set during the week of Nov. 21, 2008.

Let’s put this into prospective. The emerging markets ETF will have to rally 22% from Thursday’s close of $45.85 to the 2007 high.

Compare this to the S&P 500, which set its all-time intraday high of 2,552.51 on Thursday and is 62% above its Oct. 2007 high of 1,576.

The Weekly Chart for EEM

Courtesy of MetaStock Xenith

The weekly chart for the emerging markets ETF is positive but overbought with the ETF above its five-week modified moving average (in red) at $44.81. The stock is well above its 200-week simple moving average (in green) at $38.58.

The horizontal lines are two sets of Fibonacci retracement levels. Those at the right of the chart represent the inner decline from the Sept. 2014 high to the Jan. 2016 low. The 61.8% retracement at $38.88 lines up with the 2-week SMA.

The horizontal lines across the entire chart are the Fibonacci retracement levels of the decline from the Nov. 2007 high to the Nov. 2008 low. The 61.8% retracement of this decline is $41.46. This level has been a magnet since the week of Sept. 18, 2009.

The 12x3x3 weekly slow stochastic reading is projected to end the week at 89.17 well above the overbought threshold of 80.00.

Given this chart, my trading Strategy is to buy weakness to my quarterly and semiannual value levels of $43.59 and $38.40, respectively, and reduce holdings on strength to my monthly and annual risky levels of $46.72 and $53.86, respectively.


Published at Fri, 06 Oct 2017 19:47:00 +0000

About the author


Online resource for daily updates and information relating to investing stocks, bonds, forex, real estate and much more.