(www.etftrends.net) iShares MSCI Brazil Index Fund ETF (EWZ) has been broken its internal uptrend line and a reversal of the medium term trend was confirmed as EWZ came off a Head & Shoulders (H&S) top pattern. The H&S target of $61.07 was reached and exceeded two weeks ago with support found at $60.85.
A Candlestick Hammer reversal pattern can be seen on that day and the area where support was found was also the confluence of three different Fibonacci retracement levels using three trend measurements [trends starting from November 2008 low, March 2009 low, and July 2009 low (all not shown on chart)].
H&S minimum target calculation:
[top of Head = 80.93, less 69 (Neckline) = difference of 11.93, 73 (Neckline support broken to downside) less 11.93 = 61.07 target]
Subsequently, EWZ has rallied over the past couple of weeks back towards resistance of the Neckline, downtrend line resistance, and horizontal resistance (previously support @ $73.13), on declining volume (see purple rectangle).
Typically, once one level of long term support is broken, in this case the internal higher uptrend line, the next significant level of support is likely to be reach – longer uptrend line. This would indicate a strong possibility of another move down in EWZ with a minimum target of the long term trend line.
If EWZ heads back down with momentum there’s a possibility that EWZ will break through the long term trend line and reach a lower support area. A lower support zone has been identified on the chart between $47.38 and $48.18. This area is the confluence of previous support (47.43 – 48.18) seen with blue arrows, and the 61.8% Fibonacci retracement level of the larger trend (47.38).
A break of yesterday’s low (Monday) at $68.93 may signal the reversal. If EWZ rallies further from here, watch for a reversal higher near resistance. (www.etftrends.net)