The iShares MSCI Eurozone ETF (EZU) is an ETF which, according to the iShares website, "seeks to track the investment results of an index composed of large- and mid-capitalization equities from developed market countries that use the euro as their official currency." With 252 holdings, frankly I don't have the time to drill down, but a quick look at the top stocks (Total TOT, Santander SAN, Siemens SIEGY, Allianz) tells me that they are not all on the same page. Like other indexes, heavyweight stocks can hide what might be happening to the broader list. Keeping that in mind, let's check the charts and indicators for EZU.
In this daily bar chart of EZU, below, we can see that prices have been climbing the past year. EZU is above the rising 50-day moving average line, but we can see a number of times when prices were below the average. The slower-to-react 200-day line has defined the uptrend and is well below the price action. The volume pattern is uneven and shows a number of strong sessions.
The smoother-looking On-Balance-Volume (OBV) line shows a rise from last January to early October, and then the line moves sideways to slightly lower. The recent new price highs for the EZU -- a holding of Action Alerts PLUS, which Jim Cramer co-manages as a charitable trust -- have not been accompanied by new highs on the OBV line.
This difference is a bearish divergence. If the EZU continues to move up without the confirmation of aggressive buying, it raises concerns about the durability of the advance. The Moving Average Convergence Divergence (MACD) oscillator has been above the zero line for much of the last year, but it has not spent a lot of time in a bullish mode.
In this weekly bar chart of EZU, below, we can see a relatively small base pattern in 2016, followed by the current advance. Prices are above the rising 40-week moving average line.
The weekly OBV line shows an uptrend from November 2016 to May 2017, but then the line is neutral. On this weekly timeframe, the OBV is not confirming the advance. The trend-following MACD oscillator has been weakening since June, and only recently is crossing to the upside for a possible go long signal.
In this Point and Figure chart of EZU we can see a very powerful, straight up advance in 2017. Even though prices look very extended, a possible price target of $58.99 is projected.
Bottom line: the EZU has left gaps on the chart before, but the upside gap earlier this month with the lack of confirmation from volume makes me cautious. With the euro rallying and a possible double top being made on the CAC 40 and other European averages, I would not follow the current strength in the EZU.