iShares MSCI Taiwan Index Fund’s stock (NYSE:EWT) dropped from $16 to $13 the last 3 months and I decided to invest due to technical analysis’ signals. This pick’s reward-risk ratio is about 6 to 1, since I risk 15c/share for a possible $1/share profit. Support and resistance level found in the daily graph aided to set the stop loss and profit target bracket orders yesterday, after buying 500 shares at $12.79, pretty close to the 52-week low. The EWT stock had found support at the $13 level in October 2010, which has also been a crucial resistance level in 2010 after a long-term uptrend. The profit target is obviously defined by the resistance level in the daily graph’s close up in the image below, but I’m planning to close out part of my trading position.
I was fortunate enough to pick EWT stock right from the beginning of yesterday’s trading session, since my entry point picked almost the day’s low and the trade is already turning a profit. That’s certainly a psychological help towards holding an open position overnight – and for quite a few nights more actually! Volume also increased compared to Monday’s session adding more credibility to the short-term uptrend. However, given the fact the trend line has been broken several weeks ago, I might be entering long in a downtrend, but I believe there is a good chance EWT stock to try climbing up to $14, at least before resuming the probable downtrend. I couldn’t care less though, since the bracket orders mean I have already defined my risk and profit for this trade! I just hope the stock doesn’t gap down violently as it has done in August!