The iShares MSCI Brazil ETF (EWZ) was created to track the results of an index composed of large and mid-sized Brazilian equities. Looking at the technical picture of that ETF, we can see that after hitting a five-year-high, near the 48.47 level in January, the price reversed south and continues to move below a short-term tentative downside resistance line taken from the high of January 2nd. At the same time, the ETF is trading below another short-term downside line, but a slightly steeper one, taken from the high of January 23rd. From the short-term perspective, there is a possibility to see further declines, but let’s not forget that the downside might get limited near a medium-term tentative upside support line taken from the low of May 17th, 2019.
Given that the price continues to get held by the aforementioned short-term steeper downside line, we will continue aiming for slightly lower areas, where the Brazilian ETF might re-visit the 42.69 hurdle, which is currently the lowest point of February. If that area fails to hold this time, we will then aim for the previously-discussed upside line, which may provide some support. Fractionally below it, near the 41.50 level, lies the lowest point of November 2019 that could get tested, if the price overshoots the upside line.
The alternative scenario here could be triggered if we see a strong push higher above the previously-mentioned downside line taken from the high of January 2nd and also a price-rise above the 45.63 barrier, marked by the current highest point of February. This way, the path towards higher areas may be cleared and EWZ could end up rising to the 46.29 obstacle, or even the 47.18 zone, which is the high of January 23rd. The Brazilian ETF might correct a bit lower from there, but if the sellers struggle to push the price back below the above-mentioned downside line, the buyers could quickly take the steering wheel back into their hands and lift EWZ to the 47.18 barrier again. If this time it breaks, a further move north could end up testing the 47.79 level, marked by the high of January 6th.
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