uploads///Moving Average and RSI Analysis of EWJ on November

EWJ: Why Are Most of the Holdings Moving towards an Uptrend?

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Nov. 20 2015, Updated 8:08 a.m. ET

EWJ’s moving average

On November 18, 75% of the portfolio holdings of the iShares MSCI Japan ETF (EWJ) closed above their 100-day moving averages—up from 66% on November 17. Also, 88% of the portfolio holdings closed above their 50-day moving averages—up from 76% on November 17. Meanwhile, 58% of the portfolio holdings closed above their 20-day moving averages—up from 52% on November 17. The change in the portfolio holdings shows that most holdings were moving towards an uptrend by maintaining these moving averages as strong support points.

The moving average is a trend-following indicator. It’s also known as a “lagging indicator” because it’s calculated based on the past price performance.

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Auto manufacturing giant Toyota (TM) was 4% above the 50-day moving average and 1.5% above the 20-day moving average. However, it was 0.57%  below the 100-day moving average. Softbank Group (SFTBY) was 4% above the 50-day moving average. It was 0.96% below 20-day moving average and 1.8% below the 100-day moving average. Toyota accounts for 4.9% of the portfolio of the Wisdom Tree Japan Hedged Equity Fund (DXJ).

The above graph shows the percentage of EWJ’s portfolio holdings that were above their 100-day, 50-day, and 20-day moving averages. The graph also shows a RSI (Relative Strength Index) analysis.

EWJ’s RSI

For EWJ, 94% of its portfolio holdings were in the 30–70 RSI range on November 18—compared to 90% on November 17. This indicates that there were minor changes in the “overbought” or “oversold” area.

Meanwhile, 6% of EWJ’s portfolio holdings had an RSI of above 70. None of the portfolio holdings had an RSI below 30. The RSI is a technical indicator. It’s used to determine the “overbought” or “oversold” status of a stock. If the RSI is above 70, it indicates that a stock is overbought. If the RSI is below 30, it indicates that a stock is oversold.

EWJ’s large capitalization stocks like Mitsubishi (MTU), Honda (HMC), Sumitomo Mitsui Financial (SMFG), and Sony (SNE) weren’t overbought or oversold.

In the next part of this series, we’ll analyze EWJ and its top performers with respect to the volatility and mean return.

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