The Brazil ETF Continues Adding to A Tremendous 2016 Rally

Almost two months ago, I explained my decision to sell my position in iShares MSCI Brazil Capped (EWZ). I also pointed to a 20% correction as the next time I will consider buying again. Since then, EWZ rallied, dipped slightly to a lower low, and then resumed its current rally. That rally accelerated a bit this month. EWZ is up a healthy 10.5% in October (which is also equates approximately to the gain since my last post).


The iShares MSCI Brazil Capped (EWZ) continues its stubborn rise.
The iShares MSCI Brazil Capped (EWZ) continues its stubborn rise.

This rally has also pushed EWZ to a key resistance level from 2015’s high. I marked this point with a horizontal black line in the chart below. The chart also reminds us that EWZ is still trading within a presumed long-term downtrending trading channel. A breakout from 2015’s resistance will almost surely send EWZ to its first test of the channel in over two years.


At its recent low, EWZ dove over 30% below the low from the financial crisis. The major breakdown turned out to be a major buying opportunity.
At its recent low, EWZ dove over 30% below the low from the financial crisis. The major breakdown turned out to be a major buying opportunity.

Source for charts: FreeStockCharts.com

EWZ is up an astounding 80% year-to-date. This rally cleaved through a lot of bad news from political wrangling over a Presidential impeachment, hand-wringing over the Olympics, drought, and on-going economic woes including a recession. This is quite an amazing record that suggests that EWZ could even summon the momentum to break out of the downtrending channel. I will continue to monitoring EWZ closely as Brazil clearly still presents strong investment potential.

Be careful out there!

Full disclosure: no positions

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