With over $52.1 billion in assets under management, the iShares MSCI EAFE ETF (NYSEArca: EFA) is now the third-largest U.S.-listed ETF. EFA’s underlying index, the MSCI EAFE Index, is also one of the most widely followed developed markets indices in the world.
Suffice to say when an ETF such as EFA is on the brink of making a big technical move, investors should keep an eye on those proceedings. It looks like EFA is about to do just that.
“When it comes to portfolio construction and adding global exposure to a portfolio, EFA helped a good deal over the past year,” noted Chris Kimble of Kimble Charting Solutions. “Even though that was 10% less than the S&P 500’s return, it was 25% better than the return of EEM! Now EFA finds itself at its 61% Fib retracement level of the 2008 financial crisis and at the top of a trading channel.”
While EFA’s technicals could soon be appealing, the ETF’s fundamental outlook will be, in large part, shaped by the U.K. and Japan as those two countries combine for 42.3% of the ETF’s weight. [Goldman Bullish on Europe, Japan]
EFA is off 0.4% to start 2014 and has been held back by 0.5% declines for the iShares MSCI Japan ETF (NYSEArca: EWJ) and the iShares MSCI United Kingdom ETF (NYSEArca: EWU).
“A break above this resistance would be a big positive for EFA and it would continue to help performance for those looking for international exposure. This is pattern is an important test per where EFA will be 6 months from now,” added Kimble.
Investors looking for a reduced volatility spin on EFA can consider the iShares MSCI EAFE Minimum Volatility ETF (NYSEArca: EFAV), which is up less than 12% over the past year compared to a 15.1% gain for EFA. [Some Low Vol ETFs Worked in 2013]
Cost-conscious investors will like the iShares Core MSCI EAFE ETF (NYSEArca: IEFA). IEFA debuted in October 2012 as part of the iShares core suite and charges just 0.14% per year compared to the 0.34% charged by EFA.
iShares MSCI EAFE ETF
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of EFA.