India ETF In Downward Slope

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December 30, 2015 4:55pm BATS:INDA

indiaRick Pendergraft:  World stock markets have had a volatile year, with many of the major indexes either down or near break-even on the year. The S&P is down slightly as we head into the last few days of the year.

Meanwhile the Shanghai Composite is one of the few indexes that is up on a year-to-date basis, but the Chinese market has been a roller coaster ride this year.

India ETF

The Indian stock market has performed like most of the others, with the BSE Sensex Index waffling back and forth between positive territory and negative territory over the course of the year.

India ETF in Downward Slope

Because the Indian stock market has been waffling back and forth, it presents investors with an opportunity right now. The iShares MSCI India ETF (BATS:INDA) has seen a trend channel form in recent months; the ETF is near the top of the channel at this time and that presents a shorting opportunity.

Looking at the daily chart for the India ETF, we see that the upper rail is just under $28.50 at this time with the INDA trading in the $27.50 to $27.60 area. We also see the daily stochastic readings are in overbought territory and have just made a bearish crossover in the last few days. And all of this is taking place with the ETF dancing around its 50-day moving average.

India ETF daily chart

Looking at the weekly chart, we see how the trend channel looks on a weekly basis and it appears to go back to April. I also find it interesting that the 10-week RSI is approaching the 50 level and that this level has marked the turning point for the India ETF in the last six months.

We also see a weekly moving average coming in to play as we saw with the 50-day moving average. While the 50-day hasn’t done much in terms of serving as support or resistance, here’s something I noticed about the 13-week moving average: the INDA ETF hasn’t ventured very far from it in the last three and a half years and with the trend line moving down, it could be tough for the ETF to have a breakout.

India ETF weekly chart

The INDA has only been around since February 2012, so I looked back at the chart of the BSE Sensex Index for a longer view of potential support areas. The long-term support level is in the 21,000 area.

The BSE is trading around 26,000 currently, so that is another 19% down to support.

I don’t expect the BSE to tank and drop 20% in the next two months or anything like that, but I do see the downward-sloped trend channel on INDA continuing to dictate trade.

If we use a 19% to 20% decline in the INDA the way I see the BSE moving lower, that would put the India ETF down in the $22 to $22.50 range.

It might take six to nine months to get there and it is likely we will see the fund bouncing back and forth between the upper rail and lower rail before it gets to the $22 level.

This article is brought to you courtesy of Rick Pendergraft from Wyatt Research.

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