This emerging market is sizzling while U.S. stocks falter, charts show
When sifting through my usual list of charts — the “Magnificent Seven,” S & P 500 , sector leaders, etc. — a recurring theme was shaping: Too many charts of the biggest U.S. companies are breaking down or are at key inflection points and don’t give investors strong entries or comfortable risk/reward setups. Global events have taken over the headlines, creating a high level of uncertainty. Many trends are broken with several others on the ropes. There will be great opportunities in the near future, but the technician and trader in me is waiting for a better moment. While the U.S. markets are in limbo, it may be time for a vacation. So as we look for places to put money to work, one chart screams out: Mexico. The Mexican market, as tracked by the EWW ETF , has been quite the turnaround story. After a tumultuous 2024, things rebounded in 2025. In fact, their market made a full roundabout in 2025 with gains of 50%. This year it broke out and now it gives investors an opportunity to ride the wave. How we got here Let’s break down the chart. After a substantial multiyear run, EWW peaked around $71 in 2024. The ETF reversed course and suffered a year long sell-off resulting in a drawdown of roughly 34%. In 2025, shares made back those losses with a 50% rally and completed the full roundabout. In 2026, it broke out. This reminds me of the S & P 500 from 2022 to 2023. A year of losses was followed by a year long rally that recouped them. In 2024, the index broke out and went on an epic run. Sure, all the fundamental reasons were different, but the price action is quite similar. Trading setup Technically, what has formed is a nice rounded bottom breakout with clear upside targets and levels to the downside that help monitor risk. In this five-year weekly chart we can see how price broke above that old resistance around $71 and pushed higher. Shares peaked at $81.64 before retreating back to the levels from which it broke above. That brings us to an actionable level where we want to put money to work. Old resistance should act as new support. Yet, that is far from the only positive we see from the charts. Shares were overbought based on its RSI levels and retreated. Now we see the RSI tick back above the midpoint at 50, putting EWW back into a bull regime when its comes to momentum. To further bolster the strength in this ETF, we are seeing great relative strength. When comparing it to the S & P 500 the RS line broke above its 100-week moving average in tandem with the breakout on an absolute basis. This highlights the strength of shares not only individually but compared to the broader U.S. index. Relative strength is not only strengthening compared to the S & P 500, but it is also beginning to outperform against the rest of the world. Above you can see the EWW compared to the MSCI All-country World Index (ACWI) . This demonstrates its growing momentum against all foreign indexes. The momentum is just starting to pick up as seen in its bullish MACD crossover, RSI reading climbing above its midpoint and its break above the 50-day moving average. The trade Given the setup we have clear levels of risk/reward right in front of us. Look to buy at current levels and use stops just under $70 to manage risk. A break below that level means the trend lost its momentum and we will look to revisit later. The upside looks promising. A minimum target back to recent highs in the low 80s should be attainable. Over the long term upside targets of $90 have been established based on the breakout from this multiyear rounded bottom base. Mexico is gaining momentum, and offers investors an opportunity to diversify and escape some of the headwinds that currently swirl around the U.S. markets. — Jay Woods, CMT with Chase Games DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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