When it comes to optimal portfolio allocation, investors are constantly on the lookout for investments in foreign nations to help offset exposure to their domestic economy. Given the rising level of volatility and uncertainty in the U.S. over the past several weeks, some strategic investors are turning to country-specific exchange-traded funds (ETFs) as one way to gain an advantage. In this article, we take a look at three bullish chart patterns of funds tracking various nations that appear to be presenting investors with an ideal buying opportunity. (For more, see: 3 Country ETFs to Watch in 2017.)
While many economists classify Turkey as an emerging market, it is also regarded as a world leader in areas such as textiles, transportation, construction, electronics and agriculture products. From the perspective of geography and despite recent volatility, Turkey is in a unique position to benefit from trading opportunities in Europe, Asia and the Middle East. Taking a look at the chart for the iShares MSCI Turkey ETF (TUR), you can see that the price has recently bounced off the support of an influential trendline and appears to be back in the control of the bulls. It is interesting to note how the trendline along with the 50-day moving average have been able to prop up the price on attempted pullbacks, and many technical traders would expect this behavior to continue. From a risk management perspective, stop-loss orders will likely be set below $40.11 in case of a sudden sell-off. (For more on this topic, check out: 3 Emerging Market ETFs to Watch in 2017.)
When it comes to international investing, one of the hottest spots over the past couple of years has been Japan. As evident by the chart of the iShares MSCI Japan ETF (EWJ), you can see that the market is trading within an extremely strong uptrend that is supported by an ascending trendline and its 50-day moving average. Active traders will use the dotted trendline as a guide for determining the placement of their orders over the coming months. The current proximity to the mentioned support levels provides traders with an optimal risk/reward setup, which suggests that this fund is a candidate for a surge back toward the June high and perhaps beyond in coming months. Stop-loss orders will likely be set below $53 or $50.85 depending on risk tolerance. (For more, see: Invest In Japan With This ETF.)
From the perspective of an active trader, one of the most interesting chart patterns belongs to the PowerShares India Portfolio (PIN). Taking a look at the chart below, you’ll notice that the price has been trading with the confines of a well-formed channel pattern since late March. Sideways price action like what is shown in the chart is often regarded as a period of consolidation before the next leg in the dominant trend. The recent break above resistance (shown by the blue circle) is a common buy sign and is likely all that is needed to signal a flood of buy orders. Traders will also use the recent crossover between the moving average convergence divergence (MACD) and its signal line to confirm the breakout, and most will likely look to protect their positions by placing stops below $23 in case of a sudden pullback. (For more, see: Invest in International Markets With These 3 ETFs.)
The Bottom Line
Active traders have been on the lookout over the past several weeks for ways to diversify their portfolio. Given the bullish chart patterns of the countries analyzed above, it appears that country-specific funds could be the answer that many are searching for. The nearby support and bullish price action suggest that these markets could be the global leaders for the remaining part of 2017. (For more, see: Now Is the Time to Invest in Developed Markets.)
Charts courtesy of StockCharts.com. At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.