This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

WisdomTree Japan Currency ETF Hits a Stumbling Block

Stocks in this article: DXJ EWJ FXY

NEW YORK ( Fabian Capital Management) -- One of the hottest ETFs of the year has been the WisdomTree Japan Hedged Currency ETF (DJX), which hit an intraday high in May and has since fallen nearly 18% over the last 10 trading sessions.

Prior to this selloff, DXJ had posted gains of over 46% in 2013, which put it in the top 1% of ETF performers this year. According to Index Universe, DXJ is the top gatherer of new assets this year, with investors pouring over $7.6 billion of new money into this surging economy.

As you can see on the chart below, DXJ has fallen below its 50-day moving average and appears poised to continue its recent descent. At times like these I am reminded of the adage that "the bigger they are, they harder they fall." This appears to be the case with DXJ as early investors are more than likely taking profits and standing aside at this juncture.

This WisdomTree fund differentiates itself from the widely held iShares Japan ETF (EWJ) by carrying an additional currency component that hedges its exposure to the Japanese yen. Put simply, DXJ will outperform EWJ when the yen is falling in value against rival foreign currencies.

Looking at a chart of the CurrencyShares Japanese Yen Trust (FXY), you can see that the yen has recently regained momentum which will act as a headwind for DXJ.

If this yen continues this recent ascent and the Nikkei 225 index continues to fall, DXJ will find itself fighting two separate forces, which may exacerbate the selloff. Ultimately this decline will be healthy in the sense that these stocks can work off some of their overbought momentum and allow new investors the opportunity to purchase this ETF on a pullback.

The real question is whether or not the aggressive quantitative easing measures implemented by Japanese Prime Minister Shinzo Abe will continue to stimulate Japanese stocks and devalue their currency. So far the experiment has produced positive results but the recent selloff is the first real test of investors' resolve.

In addition, because Japanese stocks have been a leader on the upside all year long, U.S. markets may ultimately take their cue from the land of the rising sun. The S&P 500 Index has started to see its first real signs of weakness in 2013 that can be attributed to weaker economic data at home as well as global stock declines.

I still believe that DXJ is a unique investment opportunity for playing the Japanese stock market but I am cautious about entering this position until we have seen some stability return. It's always advantageous to purchase a position on a pullback in price, but I never try to catch a falling knife.

Traders who are looking to make an entry into this sector may look to use the 50-day moving average as an upside target on DXJ if it can regain those levels. Remember that with a high beta position like DXJ you should always implement a risk management strategy such as a stop loss to guard against an even more protracted decline.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

David Fabian is currently a Managing Partner at Fabian Capital Management, a fee-only registered investment advisory firm specializing in exchange-traded funds. He has years of experience constructing actively managed growth and income portfolios using ETFs. David regularly contributes his views on wealth management in his company blog, podcasts, and special reports. Visit to learn more.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs