Two weeks ago, in this November 14 post on our trading blog, we initially pointed out the relative strength of iShares China Xinhua 25 Index ($FXI) and said, “Although the main stock market indexes of the USA have been in a downtrend since mid-September, FXI actually started trending higher right as the domestic markets started selling off…and is now in pullback mode.”
In our subsequent November 19 ETF analysis, published in The Wagner Daily swing trading newsletter just a few days later, we revisited the chart pattern of $FXI and said that, “very short-term traders only might consider buying FXI if it moves above the November 16 high of $35.88.” Because US stocks had not yet confirmed at least a near-term low had been formed, we passed on “officially” adding this trade setup to our ETF Trade Watchlist. Nevertheless, we still pointed out the trade so that more aggressive, very short-term traders could take advantage of an anticipated “quick pop” is the desired. Fast forwarding to the present, take a look at the updated chart of $FXI below:
Note on the chart the level where we initially said aggressive traders could buy above the two-day high (circled in pink). This was due to the relative strength of FXI, a major level of horizontal price support (the blue line), and convergence of the 50 and 200-day moving averages (teal and orange lines respectively). Thereafter, FXI generally trended higher, but not in a very steady fashion.
Yesterday (November 28), like most stocks and ETFs in the market, FXI gapped down sharply lower, but reversed to close at its intraday high and back above its 20-day exponential moving average (beige line). This followed a normal four-day pullback from its November 23 high. This has created an ideal pullback buy setup in FXI, which has a positive reward to risk ratio for swing trade entry above yesterday’s high. Regular newsletter subscribers should reference today’s ETF Trade Watchlist section above to see our preset, exact entry, stop, and target prices for this swing trade setup.
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