Charting Barrier Breakout Levels in EEM and EFA

Mar 23, 2012: 7:49 AM CST

Traders and investors often use popular ETFs EEM and EFA for assessing overseas markets quickly, so let’s take a moment to view the key short-term barrier levels – mainly resistance and support – to watch for any key breakout from this area.

Let’s start with Emerging Markets EEM Daily:

Let’s start with a brief description of the trend in motion (which applies to both charts).

Price is in a tenuous Daily Chart Uptrend as suggested by the bullish 20/50 EMA along with a short-term series of higher highs and lows.

Price is also above the 200d SMA which is bullish unless proven otherwise shortly with a breakdown under this key indicator ($41.40 currently).

I say tenuous short-term uptrend due to the negative volume and momentum divergences similar to those plaguing the US Equity Indexes from their reversals higher from October 2011.

Unlike the US Equity Indexes, both EEM and EFA remain well-below their respective 2011 peaks (a sign of relative weakness to the US Indexes).

That brings us to the two key short-term levels to watch in these ETFs:

In the Emerging Markets ETF, the upper resistance “polarity” line rests at $44.00 per share while the lower support level trades not as convincingly at $42.00 per share (again, above the rising 200d SMA).

As we’ll see below, the upper polarity resistance in the EFA rests at $56.00 while the lower support and rising 200d SMA overlap near $53.00 per share.

Here’s the EFA – Europe, Australasia, and the Far East:

The EFA traces out an almost identical structural (price) pattern – and levels – to the EEM.

The divergences are still present with the 2012 rally back to – and slightly above – the respective October 2011 high.

Watch these reference levels for any continued bullish breakthroughs higher, or else focus on the support shelf (and any breakdown) under the price level and 200d SMA indicator.

A breakthrough could trigger an “open air” movement on to the next price target level.

Corey Rosenbloom, CMT
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