Investing in an ETF Using Technical Analysis (EWJ)

Investing in an ETF – short for Exchange Traded Fund – such as iShares MSCI Japan Index Fund (NYSEArca: EWJ) isn’t a bad idea when indicators of technical analysis imply that prices won’t easily go lower. ETFs trade like stocks, although investors actually buy and sell units instead of shares. Friday’s close at $9.32 for EWJ completed a bullish candlestick pattern, indicating that buyers would probably take control over the following days. Additionally the fund’s unit price bounced off at the support level at $9.20. That support level has been verified quite a few times since September and technical analysis interprets that as a crucial support level, which will take a lot of selling power to give way. For the time being, it can work excellently in order traders to set their stop loss in case they invest in an ETF like iShares MSCI Japan Index Fund.


The more times a support level holds, the more significant that specific price level is considered according to technical analysis. We already saw at the daily chart that price found support 4 times at $9.20 and buyers would look to set their stop loss orders close to $9.00. If the level is broken, traders must expect strong downtrend since those trading orders would simply add more selling pressure to those who would short-sell the ETF, driving prices downward. Until then setting a profit target at $9.70 seems justified by technical analysis, as strong resistance can be found at that price level. Again, the times the price met resistance at a specific price range corresponds with the importance of that resistance level. We’d say that trading on EWJ has entered a consolidation phase since August with prices moving sideways.

iShares MSCI Japan Index Fund Weekly Chart

iShares MSCI Japan Index Fund Weekly Chart

Looking at the weekly chart though traders can easily point out the importance of the support level at $9-9.20 price range. Since July 2009 the ETF price has failed going any lower than $9.00, proving that the support level is regarded as a quite important level for traders to enter long. If you trust technical analysis, investing in an ETF such as iShares MSCI Japan Index Fund on Monday is well justified just by price action.

Disclaimer: I don’t hold any EWJ shares.