In addition to the precious metals, traders active in the last few weeks have been mainly focused on the North American technology and health care companies. As investors continue to look for ways to diversify their assets outside of these key sectors, an idea might be to increase exposure to emerging markets.
As you will read about below, a common exchange-traded fund (ETF), which is used for the follow-up of the emerging market is showing technical signs that indicate that long-term, the bullish trend could just be getting started. We’ll also look at two of the ETF’s top holdings to try and determine the specific trades that could catch the attention of traders in the days and weeks to come.
SPDR Portfolio Emerging Markets ETF (SPEM)
Traders who are looking to expand their portfolio of international exposure often turn to Etfs that track niche segments, such as emerging markets. As you can see on the chart of the SPDR Portfolio Emerging Markets ETF (SPEM), this group may be of particular interest to traders during the months ahead, as prices have recently increased above the resistance of its 200-day moving average and has started an interesting step up. The second test of the 200-day moving average in the month of June is of particular interest to followers of technical analysis, because it signals that the bulls are in control of the amount of motion, and the long-term trend is likely to move upwards.
As an additional confirmation, traders will also want to note the recent bullish crossover between the 50-day moving average, and the 200-day moving average (represented by the blue circle), because it is a common, long-term buy signal that is used by traders to mark the beginning of a major long-term bullish trend. From a risk management perspective, traders will be more likely to have a bullish outlook on the emerging markets until the price of the fund for several years consecutive closes below $33.65.
Alibaba Group Holding Limited (BABA)
With a weight of 6.06%, Alibaba Group Holding Limited (BABA) is the largest of the holding of the SPEM of the ETF. As you can see on the chart below, an ascending triangle pattern is formed on the chart, as indicated by the dotted trendlines.
The followers of the technical analysis will be more likely to define their short-term target price of close to $290 which is equal to the entry point plus the height of the model. From a risk management perspective, stop-loss orders will probably be placed below one of the lines, the curves, the trend, in function of the risk tolerance and the investment horizon, in order to protect against a sudden shift in market sentiment or underlying fundamentals.
Taiwan Semiconductor Manufacturing Company Limited (TSM)
Another top holding of the SPEM ETF that can capture the attention of active traders is Taiwan Semiconductor Manufacturing Company Limited (TSM). Taking a look at the weekly chart below, over the longer term, operators will most likely want to note that the stock is trading within a very strong bullish trend and the momentum in recent weeks has sent the prices above key resistance near $60.
With a strong increase of the momentum, some traders will probably wait for a retracement to support before you buy it. However, according to the graph, it is also clear that there is no resistance levels standing in the way of continued upward movement. Depending on the risk tolerance and investment horizon, some traders may seek to enter as close to current levels as possible to try to capitalize on the dynamic.
The Bottom Line
Most of the attention of traders in North America has been spent on the stock and commodity segments such as precious metals. Based on the maps discussed above, it seems that now could be the perfect time for a broader perspective, from shares in emerging markets such as Alibaba and Taiwan Semiconductor Manfuacturing.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.