Active Traders Shift Attention to Asia-Pacific Region

Active traders in North America often focus on domestic financial markets due to reasons such as media attention and inherent brand familiarity. However, broadening exposure to other regions of the globe can often provide portfolios with a hedge to domestic politics and specific market details such as supply, demand, and supply chain logistics.

One region of the world that could worth a closer look is Asia-Pacific, which generally includes East Asia, South Asia, Southeast Asia, and Oceania. As you will read about below, asset prices in this region appear to be turning higher, and nearby support levels could be presenting an interesting entry point from a risk/reward perspective.

iShares Core MSCI Pacific ETF (IPAC)

Active traders interested in adding international exposure often turn to niche exchange-traded products such as the iShares Core MSCI Pacific ETF (IPAC). Fundamentally, the 828 holdings that make up the fund span the Pacific region, with the largest weightings going to Japan and Australia at 69.70% and 17.75%, respectively

As you can see from the chart below, the price of the fund is trading within a confined range and has started to pull away from the influential 200-day moving average. Price action near the long-term moving average will likely be used by active traders to confirm the strength of the support and for determining the placement of their buy and stop orders.

Toyota Motor Corporation (TM)

As the top holding of the IPAC ETF and one of the world’s best-known brands in automobiles, Toyota will likely a focus of active traders due to its bullish chart pattern. More specifically, as you can see below, the price of Toyota stock broke above the resistance of its 200-day moving average in early August. The rise and subsequent retest of the new-found support near $130 was an early indication that the bulls were taking control of the primary trend.

As confirmation of a long-term move higher, most followers of technical analysis will want to take note of the recent bullish crossover between the 50-day and 200-day moving averages (shown by the blue circle) because it is a common signal used to mark the beginning of a major uptrend. From a risk-management perspective, stop-loss orders will most likely be placed below $129.89 in case of a sudden shift in market sentiment or a surprise shift in the company’s fundamentals.

International investing provides investors with a broader universe for selecting portfolio investments. It can broaden an investor’s diversification, potentially adding new sources of return. In some cases, it can also help mitigate some systematic risks associated with the economies of specific countries.

Sony Corporation (SNE)

Another well-known company from the pacific region that could capture the attention of active traders over the weeks ahead is Sony. Looking at the chart below, you will notice that the price peaked in mid-summer and has since started to retrace toward two influential trendlines.

Trend traders will likely use the horizontal trendlines to inform their strategies over the weeks ahead. Buy orders will most likely be placed as close to the dotted lines as possible, while stop-loss orders will likely be set below $69.35 in case of a sudden shift in sentiment.

The Bottom Line

Many active traders across North America are solely focused on domestic securities, but as we have discussed above, there appears to be ample opportunities for those willing to look overseas to regions such as Asia-Pacific. Even more specifically, large and well-known Japanese companies such as Toyota and Sony appear positioned to make a move higher over the weeks and months ahead. 

At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.