Conflicting MACD Patterns Suggest a Consolidation for EAFE Stocks

09/05/2017 2:59 am EST

Focus: STOCKS

Marvin Appel

President, Signalert Asset Management LLC

EFA appears to be an attractive intermediate-term holding for as long as our models remain neutral-bullish (or bullish).  The lower Bollinger band (now 65.70) is a good bottom fishing area, asserts Marvin Appel, MD, PhD, of Signalert Asset Management.


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The chart below shows the iShares MSCI EAFE Index ETF (EFA) and its medium (12-26-9 day) MACD.  Note that EFA has been moving sideways since June 2.  Everything in this chart is consistent with the absence of a trend.

chart

First, the Bollinger bands are horizontal and fairly narrow.  EFA is right at the middle band. 

Second, MACD has formed two conflicting patterns.  On the one hand, we see a negative divergence for June-August, when the August high topped June’s peak price but the August MACD peak fell well below May’s.  This is normally bearish, so it is a testament to the underlying bullish fundamentals that EFA has not given up any ground. 

On the bullish side, we see a rising double bottom in MACD and in price from the July low to the August low.  If EFA can hold its ground here, which I expect, we will see a fresh MACD buy.

I think the bulls will end up winning this one.  EFA appears to be an attractive intermediate-term holding for as long as our models remain neutral-bullish (or bullish).  The lower Bollinger band (now 65.70) is a good bottom fishing area.  In the absence of a 2% retracement to the lower Bollinger band, stay the course.

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