Special Report: China stocks ready to break out?

Late in 2010, the BRIC markets began to lag the S&P 500. Money flowed out of Brazil, Russia, India, and China to other frontier markets and back to the U.S. market. Now the BRICs are on traders’ radar screens again, and we’re spending the week looking at what’s changed in their technicals.

We’ve already seen how Brazil rebounded late in 2011. Today, in part 2 of our special report, we take a look at China

Accessing China can be easily be done through the iShares Trust FTSE China 25 Index ETF (FXIquote).  The FXI ETF seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE China 25 Index. 

The FXI chart setup presents a similar picture to Brazil’s iShares MSCI Brazil Index ETF (EWZquote) from its move above downward trendlines and its move above the 200 day moving average.

Again like Brazil, FXI has strongly rallied off its lows back in October and price is now pushing up against resistance at $40.70. A solid close above $40.70 would be considered a technical breakout.

There’s one more similarity to look out for. EWZ seemed to be setting up for a Golden Cross — a bullish event where the 50 day moving average crosses above the 200 day moving average.– and so is FXI. The cross could happen within the next few days… or it may not happen at all.

Tomorrow:

Brazil and China seem to have a lot in common right now, but that’s not necessarily the case with tomorrow’s stop on the tour. We’ll be looking at India.