The iShares MSCI Australia ETF (NYSEArca: EWA) has been one of the best-performing non-leveraged, single-country exchange traded funds tracking a developed market since early last year. Over the past 12 months, EWA, the largest Australia ETF, is up more than 33% and the good times are still coming for the fund.
EWA is up nearly 6.4% to star 2017. Importantly, some market observers view Australian stocks as attractively valued, a bonus when considering the world’s 12th-largest economy has not seen a recession in a quarter century.
Looking at EWA’s chart, “you can see that the price has recently broken above the resistance of a well-defined ascending triangle. The close above the dotted trendline combined with the surge in volume and crossover between the MACD and its signal line is a clear technical buy sign,” according to Investopedia.
Thanks to comparatively high interest rates, Australia ETFs like EWA sport enticing dividend yields, which can help investors generate current income while expanding the international portions of their portfolios. EWA has a trailing 12-month dividend yield of 4%, or nearly double the comparable yield on the S&P 500.
There is some speculation that RBA is nearing the end of its lengthy tightening cycle. If that is the case, the Australian dollar and the CurrencyShares Australian Dollar Trust (NYSEArca: FXA), which tracks the Aussie against the U.S. dollar, could get a lift. That could be a boost to the unhedged EWA.
Australia’s looser monetary policy could support the economy but weigh on the AUD. Consequently, investors may track the markets through currency-hedged ETFs that try to mitigate the negative effects of a weakening Aussie, including the iShares Currency Hedged MSCI Australia ETF (NYSEArca: HAUD) and Deutsche X-trackers MSCI Australia Hedged Equity ETF (NYSEArca: DBAU).
“Based on the height of the pattern, traders will likely set their target prices near $23.61. Most active traders will likely set their stop-losses below the sloping trendline or the 200-day moving average ($19.61) depending on their risk tolerance,” notes Investopedia.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.