Looking at the technical picture of the iShares MSCI Brazil ETF (EWZ) on our daily chart, we can see that it continues to drift lower, while trading inside a short-term falling channel pattern, drawn from around the beginning of January. Lately, the ETF has been running near the lower bound of that pattern. Even if the price rebounds from that area, as long as it stays inside the above-discussed pattern, we will stay bearish in the near term. But let’s not forget, that this move lower could still be seen as temporary correction, because EWZ continues to sit above a medium-term tentative upside line, drawn from the low of May 14th.
As mentioned above, if the lower side of the falling channel holds for now, the price might rebound somewhat. That said, if it still stays below the 32.97 hurdle, marked by the low of February 22nd, this may result in another slide. EWZ could then drift back to the 32.05 obstacle, or to the 31.55 hurdle, marked by the lows of November 11th and 16th. If the price continues to fall, the next possible target might be at the crossroads of the lower side of the channel and the aforementioned upside line.
The RSI and the MACD are both pointing lower. The RSI is below 50 and the MACD is below zero and its trigger line. The two oscillators show increasing downside price momentum, which supports the above-mentioned scenario.
Alternatively, to examine the upside, we would need to see a break of the upper side of the falling channel. A break above the 35.28 barrier, marked near the lows of February 2nd, 9th, 10th and 18th, may invite more buyers into the arena. EWZ might then rise to the 36.85 hurdle, which marks the highest point of February. Initially, the index could get halted around there, however, if the bulls are still feeling comfortable, they may lift the price above that hurdle, potentially aiming for the 38.09 level. That level is marked by the highs of December 18th and January 12th.
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