Japan ETF Could Have Chart Problems

There is no denying Japan exchange traded funds have, thus far, delivered strong returns relative to other non-U.S. developed market funds this year.

It is hard to quibble with the returns offered by an ETF such as the iShares MSCI Japan ETF (NYSEArca: EWJ), the largest Japan ETF by assets. EWJ is up 23.3% year-to-date and has hauled in over $5.8 billion in assets, making it the third-best ETF by that metric this year. [Investors Still Like Japan ETFs]

EWJ and rival Japan ETFs have been buoyed by a weak yen and Prime Minister Shinzo Abe’s efforts, also known as Abenomics, to reinvigorate the world’s third-largest economy while boosting inflation.  [Evaluating Japan ETFs]

However, an interesting scenario has emerged over the past 90 days. EWJ has noticeably lagged the iShares MSCI EAFE ETF (NYSEArca: EFA). Over that time, EFA is higher by 10.2% compared to gain of 6.6% by EWJ.

At least one technical analyst sees the potential for a pullback in EWJ.

“EWJ has been having some difficulty with resistance at $12 to $12.20. While the Japan ETF has been making higher lows – keeping the uptrend alive, it’s been unable to make higher highs which put it into question whether buyers can keep EWJ from making a trend change,” writes Andrew Thrasher for Trader Planet.