iShares MSCI All Peru Capped Index Fund (EPU) continued its decline last week on lower volume after seeing record volume the week prior. It closed the week at $45.92, only $0.05 shy of the low of the week, $45.87. The 21 period exponential moving average (ema) on the weekly chart is close by, currently at $45.61, and may provide some short term support. 

However, when looking at the daily chart, EPU looks to have started a move towards further declines near term. EPU broke down from a double top trend reversal pattern several weeks ago and has been in a steady decline since forming the second top on January 3, 2011. The bears are now clearly in control. 

EPU has already busted through support of the double top target, which was $46.81. It reached $46.85 two weeks ago then bounced before proceeding to decline further. The target of the double top is determined by taking the distance from the neckline ($49.08) to the high ($51.35) of $2.27, subtracted from the neckline. 

At a minimum, based on Fibonacci analysis, EPU should retrace to the 38.2% level of the trend measured from the August 12, 2010 low (purple on charts), which is at $44.68. This area of potential support is strengthened in significance as previous support was found at $44.75 on October 19, 2010. These two price levels are very close to one another. 

This is a conservative calculation as that trend is contained within a larger trend starting from the May 6, 2010 low (Fibonacci blue on charts). Therefore, if support is found at the 38.2% level, it’s likely to be only temporary. 

The next level to watch is the 38.2% Fibonacci retracement of the larger trend which is at $43.11, followed closely by the 50% retracement of the shorter trend at $42.62, together, creating a zone of potential support from 43.11 to 42.62.

 The largest potential drop from current levels would likely be around $35.95, previous resistance and the high of the range of a 10 months base completed in early September 2010. Although, there’s no reason to believe at this point that EPU will retrace that far. (www.etf-portfolios.com)