Technical Thursday: BRICs Break Out


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Over the five trading days since my post last Thursday all four BRIC nations have moved higher. From a purely technical perspective this provides a level optimism that we may see additional gains in the future.

Brazil, here represented by the iShares MSCI Brazil Index ETF (EWZ, quote ), was down from Wednesday November 29 until it popped on Wednesday December 5, moving up from a close of $51.46 on Tuesday to a close of $52.34 on Wednesday.  That is a gain of nearly 2%.

The gain is welcome and adds some support to the idea that EWZ bottomed in May.  Since early November it apperas to have been establishing a floor from which a slow climb higher could develop.

Russia, here the Market Vectors Russia ETF (RSX, quote ), enjoyed success as well.  From a close of $27.41 on Wednesday November 28 the ETF rose to a close of $28.38 on Wednesday December 5. That is a return of nearly 4%, double that of EWZ.

RSX also appears to have bottomed this past summer.  The trading activity of the past week propelled the ETF to the middle of its consolidation range.  Barring any unforeseen developments I can see the ETF trading higher toward $30.00 with the downside risk limited to about $27.00.

The best performing of the four ETFs profiled here is EPI, the WisdomTree India Earnings Fund (EPI, quote ).  It is up approximately 6% over the same period.  This is significant trading activity as the ETF broke out last Thursday, opening higher than the previous days high and closing higher on the day. This is sometimes referred to as "gapping up".  This is also generally interpreted as a positive indicator and apparently was taken as such by traders since the ETF continued to trade higher through Wednesday, December 5.

Like the othe BRICs this ETF also bottomed in the early summer.  That bottom also matched lows achieved at the end of 2011, perhaps a "double bottom".  A double bottom is also generally perceived as a bullish indicator.  EPI is still consolidating but has a steep grade relative to the higher lows and is approaching the top of its trading range.

Finally FXI, the iShares FTSE/Xinhua China 25 Index ETF (FXI, quote ).  As with the others FXI has traded higher and gapped up.  But unlike EPI that gap up only occurred yesterday, giving the ETF an approximate 4% gain for the week.

That gap higher took the ETF above the top of its recent trading range, another significant indicator. FXI also bottomed in late summer and aggressively tested that bottom before beginning to ascend in September giving it more legitimacy   After assessing these factors I will find it surprising if FXI does not trade higher moving forward.

For short term traders keeping an eye on emerging markets there is something to be optimistic about in these charts and the ETFs performance.  Fundamentals aside, all four of these ETFs should trade higher in the near term.

But they must also be monitored closely.  All of this analysis gets thrown out the window as soon as a significant piece of unexpected bad news gets released.  There is a lot to be concerned about.  But there are always short term profits to be had.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks

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