This Emerging Market Could Deliver a +28% Gain
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If history repeats itself, this could be the best way to profit MSCI South Africa (NYSE: EZA) could be the top performing emerging market ETF in the coming months.
Right now, EZA is trading near its long-term support level. But I think that's about to change...
The weekly chart of EZA below includes the 26-week ROC at the bottom. The indicator became oversold in September and has since been in an uptrend. In the last week, the ROC broke above its 20-week moving average. This confirms that ROC is in an uptrend and is a bullish indicator pointing towards higher prices.
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The price pattern is also bullish. Recent price action created a triangle pattern which allows us to calculate a price target. When the difference between the downward sloping line ($77.58) and the support line ($56.80) is added to where EZA broke out, we get a price target of $83.68 ($20.78 + $62.90 = $83.68). That represents +28% upside potential from recent prices.
The chart also shows how to limit risk in this trade. Once broken, resistance generally becomes support and will often limit the down side in a trade. Resistance near $57 on EZA halted price advances in 2009. Once the price broke above that level, $57 became support. Prices have bounced off that price four times in the last 18 months. A close under $57 would show that support has failed and it's time to exit the trade.
EZA is a great way to add international exposure to your portfolio. Emerging markets tend to move the fastest in bull markets. The chart shows a bullish pattern and the potential reward is more than twice as high as the risk.
EZA is a great way to add international exposure to your portfolio. Emerging markets tend to move the fastest in bull markets. The chart shows a bullish pattern and the potential reward is more than twice as high as the risk.
Action to Take: Based on the analysis above, here's how I would trade EZA:
 Purchase shares at the opening of trading on Monday, January 23rd Sell shares if prices break support at $57.00 Target price = $83.68
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Will continue to hold iShares Lehman 7-10 Year Treasury (IEF), iShares Barclays 20+ Year Treasury Bonds (TLT), and SPDR Gold Shares (GLD).
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National Resource Partners (NYSE: NRP) made small but steady gains most of this week. The stock is currently trading between the 50-day moving average and the upper Bollinger band which currently intersects close to the 150-day moving average near $28.75. Daily RSI is above the key 50-juncture and rising. Daily MACD remains on a "buy" signal although the two MACD lines have flattened. Right now, I'm ahead on the trade by a small amount. My stop-loss of $23.63 and target of $36.56 hold.
Wal-Mart (NYSE: WMT) continues to surge scoring a new 52-week high this week. The shares have formed an accelerated uptrend since September when they broke out of a multi-month base. Shares are now near the upper Bollinger band. Daily RSI is near the key overbought 70 level, but have not hit it yet. To date, I'm ahead about 7% on the trade. I'm raising my stop-loss to $55.89; my target of $64.95 holds.
Starbucks (Nasdaq: SBUX) likewise hit a new 52-week high this past trading week possibly on news that the company has forged a distribution agreement with an Indian coffee company. Shares are trending consistently higher above the 50-day moving average. Daily RSI is close to the overbought 70 level. I'm currently up 8.8%. I'm raising my stop loss to $44.89 from of $39.49 and boosting my target to $52.89.
Verizon (NYSE: VZ) held steady during the week. The stock is now above a rising 50-day moving average and approximately mid-way between the two Bollinger bands. Daily RSI is moving sideways, but above the key 50 juncture. I remain ahead on the trade by 2.7%. My stop-loss of $35.85 and target of $41.67 hold.
Kimberly-Clark (NYSE: KMB) is trading close to a new 52-week high just before the $74 level. Shares tested the upper Bollinger band this week before retreating Friday. Daily RSI is falling, but remains well above the key 50-juncture. MACD is poised to give a buy signal. I'm currently up 3.6% on the trade. My stop-loss of $66.62 and target of $77.43 remain.
Abbott Labs (NYSE: ABT) moved sideways during the trading week. Shares have found strong support near $55, but are also experiencing resistance just above $66. Daily RSI is above the key 50-juncture and rising. Daily MACD is on a weak "sell" signal. My stop-loss of $53.05 and target of $62.50 hold.
Family Dollar Stores (NYSE: FDO) formed a base of support this week at $53 before rallying strongly on Thursday. On Friday the shares touched my buy on stop level of $55.09. The stock has also climbed back above the key 150-day moving average. The MACD histogram has narrowed and MACD is close to giving a buy signal. The stock likely has some work to do at current levels, but appears to have found renewed buying interest after a sharp decline from above the $59 level which began in late October. Subscribers who have not taken a position in the stock should watch it closely.
Chipotle Mexican Grill (NYSE: CMG) continued to move higher this week, hitting a new 52-week high near $360 before slightly retreating Friday. The stock is testing the upper Bollinger band. Daily RSI is approaching overbought territory, but not there yet. Daily MACD is on a "buy" signal. The company will announce fourth-quarter and full-year results on February 1, 2012. I'm currently up almost 13% on the trade. My stop-loss to $329.08 and $377 target hold.
National Resource Partners (NYSE: NRP) made small but steady gains most of this week. The stock is currently trading between the 50-day moving average and the upper Bollinger band which currently intersects close to the 150-day moving average near $28.75. Daily RSI is above the key 50-juncture and rising. Daily MACD remains on a "buy" signal although the two MACD lines have flattened. Right now, I'm ahead on the trade by a small amount. My stop-loss of $23.63 and target of $36.56 hold.
Wal-Mart (NYSE: WMT) continues to surge scoring a new 52-week high this week. The shares have formed an accelerated uptrend since September when they broke out of a multi-month base. Shares are now near the upper Bollinger band. Daily RSI is near the key overbought 70 level, but have not hit it yet. To date, I'm ahead about 7% on the trade. I'm raising my stop-loss to $55.89; my target of $64.95 holds.
Starbucks (Nasdaq: SBUX) likewise hit a new 52-week high this past trading week possibly on news that the company has forged a distribution agreement with an Indian coffee company. Shares are trending consistently higher above the 50-day moving average. Daily RSI is close to the overbought 70 level. I'm currently up 8.8%. I'm raising my stop loss to $44.89 from of $39.49 and boosting my target to $52.89.
Verizon (NYSE: VZ) held steady during the week. The stock is now above a rising 50-day moving average and approximately mid-way between the two Bollinger bands. Daily RSI is moving sideways, but above the key 50 juncture. I remain ahead on the trade by 2.7%. My stop-loss of $35.85 and target of $41.67 hold.
Kimberly-Clark (NYSE: KMB) is trading close to a new 52-week high just before the $74 level. Shares tested the upper Bollinger band this week before retreating Friday. Daily RSI is falling, but remains well above the key 50-juncture. MACD is poised to give a buy signal. I'm currently up 3.6% on the trade. My stop-loss of $66.62 and target of $77.43 remain.
Abbott Labs (NYSE: ABT) moved sideways during the trading week. Shares have found strong support near $55, but are also experiencing resistance just above $66. Daily RSI is above the key 50-juncture and rising. Daily MACD is on a weak "sell" signal. My stop-loss of $53.05 and target of $62.50 hold.
Family Dollar Stores (NYSE: FDO) formed a base of support this week at $53 before rallying strongly on Thursday. On Friday the shares touched my buy on stop level of $55.09. The stock has also climbed back above the key 150-day moving average. The MACD histogram has narrowed and MACD is close to giving a buy signal. The stock likely has some work to do at current levels, but appears to have found renewed buying interest after a sharp decline from above the $59 level which began in late October. Subscribers who have not taken a position in the stock should watch it closely.
Happy TRADING INVESTING
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I hope you will learn from my years experience as a professional trader.