NEW YORK (FMD Capital Management) -- The Japanese economy got off to a roaring start through the first half of 2013 and then subsequently stalled due to concerns about the effectiveness of the governments quantitative easing efforts.Prime Minister Shinzo Abe has been on a quest to inflate the Japanese economy through aggressive strategies to reverse decades of stagflation. However, the resulting inflationary effects have raised consumer prices and hampered confidence in Japanese stocks. A quick check on the iShares MSCI Japan ETF ( EWJ) shows the fund has been mired in a broad sideways trading range since hitting a high in May. This index represents over 300 Japanese stocks that have struggled to match the growth of the U.S. market over the last six months.
Based on that assessment, if you currently have exposure to this country I would continue to hold your positions in the expectation of higher prices. I would closely monitor the yen as an early warning signal of any potential problems that would precipitate a sell off. In addition, having a defined exit strategy to lock in gains in case the tide turns is always a prudent investment discipline. New investors looking to trade the breakout will have a more difficult decision because of the overhead resistance. My advice is to start small and look to average into new positions on a spike in volume and momentum above the prior high. Another strategy might be to wait for a pullback to initiate a new position at a more attractive cost basis by using the current volatility to your advantage. No matter what your strategy, remember that international markets can often time trade much differently than domestic stocks. That can be a blessing or a curse depending on the environment and your positioning. That is why using an ETF to diversify your risk and remain liquid is one of the best ways to access these markets. At the time of publication the author had no position in any of the stocks mentioned. Follow @fabiancapital This article was written by an independent contributor, separate from TheStreet's regular news coverage.