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Since EEM responds so well to technical levels, watch this!

EEM, an iShares MSCI Emerging Markets ETF, complies very well with technical analysis levels as we can make 4 observations based on this chart. Based on price action, a 2018 top may or may not be in but traders will have to incorporate this resistance into their trading plan.

EEM weekly chart from 2011 - present

EEM weekly chart from 2011 – present | Source: Tradingview

 

Three observations that describe EEM

Back in January I observed that EEM had broken above a 6-year resistance zone at 45-46. This break above appeared to be a valid one since price stayed above for nearly 3 months. With new data available, we can make a number of new observations. EEM is an iShares MSCI Emerging Markets ETF.

 

Observation #1 – Break out of 6-year resistance is valid

That break was a good one. Despite steep early-Feb correction by global indices, EEM is still trading above that 6-year resistance – currently at 49.70.

Observation #2 – That 6-year resistance is now a good support confirmed by price action

That 6-year resistance between 45-46 turned out to be a good resistance-turned-support. At the lowest point on 09 February, EEM printed 45.04. This was followed by a sharp V-shaped rebound. Concept of interchangeable support-resistance is discussed here.

Observation #3 – EEM is very technical

EEM price action complies to technical analysis levels very well.

 

If you agree with observations #1 – 3, beware #4

Watch resistance zone between 50.50 – 52.50. This was a previous resistance zone defined by 2008 May high and a top between March – April 2011. Recently this resistance was observed by EEM price action when it turned after printing 52.08 on 28 January 2018.

Observation #4 – 50.50 – 52.50 the next resistance to overcome

It is 10 months too early to declare that EEM has topped for 2018 but before it can go higher, the very technical play that EEM has been following so far require traders to make plans for resistance between 50.50 – 52.50. This level was revealed on 28 Jan.

 

Note: For Asian readers, EEM could be an important indicator for Asian indices.  According to MSCI,

“The MSCI Emerging Markets Index captures large and mid cap representation across 23 Emerging Markets (EM) countries*. With 837 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.”

9 out of top 10 EEM stock holdings are Asian, 7 of them from China (could be a H-share e.g. Tencent).

EEM top 10 holdings on 26 February 2018

EEM top 10 holdings | Source: Screengrab from Morningstar on 26 February 2018

Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.

“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.

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