Possible Buy Entry In The iShares FTSE/Xinhua China 25 ETF (FXI)

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January 23, 2013 11:32am NYSE:FXI

sellbuyThe iShares FTSE/Xinhua China 25 Index (NYSEARCA:FXI) is consolidating near the high of its last move. In the near-term, $FXI would present the most ideal swing trade buy entry point if it underwent some sort of false breakout action, followed by a selloff to the rising 20-day EMA (around the $41.00 area).

However, regardless of whether it continues to hold near the $42.00 level or retrace a bit lower, we feel the ETF needs another week of sideways price consolidation to produce a decent base of support. Presently, $FXI is only 13 days into its current base, and we prefer to see at least 15 to 20 days of basing action before a breakout. The current daily chart pattern of $FXI is shown below:


In yesterday’s technical ETF commentary, we said Market Vectors Coal ETF ($KOL) was niely positioned for technical trade entry, and we are now “officially” long in our model ETF portfolio. Nevertheless, $KOL still has some work to do, as it must break out above the high of its current trading range (over the $26 level). If it convincingly moves above this level, we could possibly see a rapid move to the $32.00-$33.00 area. This price range marks a prior support level that should now act as resistance on the way up. The longer-term weekly chart of $KOL below illustrates this:


Notice on the chart above that there wasn’t much trading that took place in the $26.00 to $32.00 range when the ETF was formerly in a downtrend. This means there is minimal overhead price supply, which could enable the price to easily run to $32.00 if the breakout generates enough momentum. This makes for a very favorable reward to risk ratio, meaning there is quite a bit of upside (reward), while still allowing for a fairly tight stop (risk).

To learn the detailed methodology of our proven ETF and stock trading system, as well as to receive detailed entry and exit prices of our top ETF and stock trade picks, sign up for your 30-day risk-free subscription to The Wagner Daily athttp://www.MorpheusTrading.com.

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