The emerging markets (EM) space has been a strong performer within the past month as evidenced in the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) and more strength is ahead, but that will depend on this key technical indicator.

EEM is up 6% since the beginning of October, which is outpacing the S&P 500’s 4% gain.

“It puts us firmly in the ‘buy the dip, this is an opportunity’ camp here. [It’s] a very bullish setup for emerging markets. They’re basing and I think positioned to reverse higher,” said Ari Wald, head of technical analysis at Oppenheimer on the CNBC show “Trading Nation.”

“I want to call out the strength we saw a couple years ago in 2017. That reversed a 10-year downturn in EM dating back to its 2007 peak. Now EM went on to peak in January of 2018 and really had a classic yearlong bear market into its December 2018 low. It’s now spent 2019 building the base. It’s been backing and filling — starting to make higher lows, the moving averages are starting to slope higher. And we think the next turn is to the upside,” he said.

A key price level will be the $45 mark, which could signal more bullishness should that ceiling be broken.

“We need to see a rally above the April peak at $45 to confirm the completion of the base. I think that sets the stage for a move back to prior peak levels at around $50. In the meantime, it’s important to hold $42 support if our bullish outlook is going to play out,” said Wald.

Investors who sense weakness in emerging markets can look to the Direxion MSCI Developed Over Emerging Markets ETF (NYSEArca: RWDE). RWDE provides a means to not only see developed markets perform well, but a way to access a convergence/catch-up in performance of DM relative to EM, a spread that has clearly widened over the past 6 months.

The fund seeks investment results that track the MSCI EAFE IMI – Emerging Markets IMI 150/50 Return Spread Index. The index measures the performance of a portfolio that has 150% long exposure to the MSCI EAFE IMI Index (the “Long Component”) and 50% short exposure to the MSCI Emerging Markets IMI Index (the “Short Component”).

For investors looking for the continued upside in emerging market assets, whether driven by a weakening USD or continued developments around trade, the Direxion MSCI Emerging Over Developed Markets ETF (NYSEArca: RWED)offers them the ability to benefit not only from emerging markets potentially performing well, but from emerging markets outperforming developed markets.

For more relative market trends, visit our Relative Value Channel.

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