Stocks to Sell #1: iShares MSCI Japan ETF (EWJ)
Click to Enlarge In 2013, Japan’s stock market benefited enormously as the Bank of Japan’s aggressive quantitative easing policy fueled weakness in the yen and provided a tailwind to exporters.
Now, the opposite trend might be set to occur.
When investors go into “risk-off” mode, the yen typically strengthens — a trend that indeed has begun to emerge in the past week. The potential impact of the stronger yen is visible in the underperformance of exporters such as Toyota Motor (TM) and Sony (SNE). These worries contributed to a sharp, 4.7% selloff in the iShares MSCI Japan ETF (EWJ) in just the three sessions ended Monday.
Now, the EWJ chart indicates more weakness might be on the way. The ETF has broken through both its long-standing lower support line and its 200-day moving average, and it stands to fall further if there is any additional weakness in risk assets. Another potential catalyst for a downturn is the increase in the national sales tax, set to go into effect April 1.
If you’re fortunate enough to have ridden the gains in EWJ during the past year, it’s time to pull the plug.