South Korean KOSPI Index (EWY) - Quick Note
We see a possible setup in the South Korean KOSPI Index. We will use the ETF “EWY” as a proxy for the South Korean stock market. South Korea will be having the National Assembly (congressional) election on April 10th and stock markets often have a “so glad it is over” rally afterward. Moreover, with a Price to Earnings (PE) ratio of around 13.2x, it may undervalued relative to other global indexes. Comparatively, the PE ratio of the S&P 500 is about 21x.
Looking at the weekly chart of EWY, it just broke the downtrend line from May 2021. Price is also above the Anchored Volume Weighted Average Price (orange line) from that time, signaling that buyers are now in control and that sellers are washed out. A stop-loss order below the up-trending 10-week EMA around $65 could be sufficient to protect the downside. The Fibonacci Pivot Points provide price targets of $69.8 (about 7%) and $74.84 (about 15%). If it can test the previous high of $92, that would be about a 37% gain, although it may take a lot of time to reach this level.
Looking at the daily chart, we can see that EWY follows a 54 trading-day cycle bracket and 27 trading-day half cycles. A new cycle bracket starts on 4/4 and EWY could have a larger move after the elections are completed on 4/10. If the uptrend continues, it could last up to early May, when the half-cycle should face some selling pressure. The half-cycle trough around 5/13 could provide another buying opportunity. Note that EWY tends to break below the 21 EMA and then reverse. As long as it remains above the 50 SMA (green line) the bulls have the edge.
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