South Korea ETF Poised for More Upside

In a mostly glum year for single-country emerging markets exchange traded funds, the iShares MSCI South Korea Capped ETF (NYSEArca: EWY) is something of a standout even with a loss of 1.7%.

EWY, one of the largest country-specific ETFs of any type with almost $4.4 billion in assets under management, has been a stout performer over the past six months. Over that time, investors have embraced low valuations on South Korean shares even after bankers and policymakers there acknowledged the two primary risks facing Asia’s fourth-largest economy are a weak Japanese yen and the specter of Federal Reserve tapering. [South Korea Bull Stampedes as Investors Rush In]

EWY has been bolstered by strong fundamentals over the past few months, but seem an alluring technical picture regarding the ETF.

“Notice that EWY is attempting to set its first ‘higher low’ since pulling back in off the swing high in October. Over the next week or two, we would like to see the price action tighten up around the 50-day moving average, which would present us with a low-risk buy entry point,” writes Deron Wagner of Morpheus Trading Group.

Wagner goes on to note that EWY has formed “a base of consolidation” near the highs of 2012.

“The current base is seven weeks old, and for the most part has held above the 10-week moving average (similar to the 50-day moving average). From here, a breakout above the high of the seven-week base should produce enough bullish momentum to take out the highs of 2012,” he said.