Sell Ratings on Three Different European-Related ETFs Signals Potential Trouble Ahead
European markets have been rallying nicely over the last few months with a number of countries seeing sharp rallies off their October lows. Unfortunately the rallies have put a number of Exchange Traded Funds (ETFs) in overbought territory on both their weekly and daily charts.
Three ETFs saw their daily stochastic indicators make bearish crossovers on December 31—the iShares MSCI Germany ETF (EWG), the iShares MSCI United Kingdom ETF (EWU), and the SPDR Euro Stoxx 50 ETF (FEX). Those same three ETFs all have “sell” ratings on the Tickeron Scorecard currently as well.
The EWU saw a recent surge when it was announced that there was a Brexit deal in place for England to leave the European Union. The unknown status had been hanging over the head of the British market for quite a while, so the idea that a last minute deal was reached was a relief for investors. Unfortunately it could mark a high point over the short term.
Looking at the FA screener, the EWU and the EWG both have one negative indicator and zero positive ones. The FEZ has one positive indicator and zero negative ones. Because these are ETFs, there are only a few fundamental indicators available. For the EWU the lone bearish signal is from its Outlook Rating and for the EWG it’s the Seasonality Score that is negative. The FEZ gets a positive reading from its Outlook Rating.
On the technical side, all the same indicators are available that we see with individual stocks. The EWG has three bullish signals on the technical side and two bearish signals. The FEZ and the EWU both have four bearish signals and two bullish signals from the technical indicators. There are two areas where all three receive bearish signals—the MACD indicator and the Bollinger Bands. Both the FEZ and the EWU receive bearish signals from their RSI indicators and the Momentum Indicators. All three funds were in overbought territory based on the daily stochastic indicators, but the EWU exited overbought territory on January 4.
Another item of concern for these three ETFs is their current sentiment, specifically the short interest ratios. All three have very low ratios at this time. In fact, the FEZ’s ratio is at 0.60 and that is the highest of the three. What this suggests is that investors are pretty bullish at this time and that could be a concern if we see bulls exiting their positions.
The comparison feature for Tickeron shows how these three ETFs stack up against one another and how they compare to other funds.
EWG sees MACD Histogram crosses below signal line
EWG saw its Moving Average Convergence Divergence Histogram (MACD) turn negative on May 01, 2024. This is a bearish signal that suggests the stock could decline going forward. Tickeron's A.I.dvisor looked at 49 instances where the indicator turned negative. In of the 49 cases the stock moved lower in the days that followed. This puts the odds of a downward move at .
Technical Analysis (Indicators)
Bearish Trend Analysis
The Stochastic Oscillator may be shifting from an upward trend to a downward trend. In of 63 cases where EWG's Stochastic Oscillator exited the overbought zone, the price fell further within the following month. The odds of a continued downward trend are .
EWG moved below its 50-day moving average on April 30, 2024 date and that indicates a change from an upward trend to a downward trend.
The 10-day moving average for EWG crossed bearishly below the 50-day moving average on April 19, 2024. This indicates that the trend has shifted lower and could be considered a sell signal. In of 18 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where EWG declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Aroon Indicator for EWG entered a downward trend on April 30, 2024. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
Bullish Trend Analysis
The RSI Oscillator points to a transition from a downward trend to an upward trend -- in cases where EWG's RSI Indicator exited the oversold zone, of 32 resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued upward trend are .
The Momentum Indicator moved above the 0 level on April 26, 2024. You may want to consider a long position or call options on EWG as a result. In of 78 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where EWG advanced for three days, in of 337 cases, the price rose further within the following month. The odds of a continued upward trend are .
EWG may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
Fundamental Analysis (Ratings)
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