Uncertainty Abounds In Israel, But Stock Market Thrives

Voters turned out in droves Tuesday for Israel’s parliamentary election, widely viewed as a referendum on Prime Minister Benjamin Netanyahu. Netanyahu was an early favorite against his closest challenger, Yitzhak Herzog of the center-left Zionist Union party, but he has faced an unexpectedly strong challenge from Herzog, whose campaign has focused mostly on social and economic issues.

Israel’s economy is struggling, and that might be an understatement. Last month, the Bank of Israel unexpectedly cut its interest rate by 15 basis points to 0.1% to curb the rise of the shekel and pull the country out of deflation. Consumer prices dropped 0.9% in January, the largest monthly decline since September 2006. The rate cut was Israel’s 13th since 2011.

Despite uncertainty on many fronts in Israel, the Tel Aviv 100, an index of the 100 largest-cap companies in the country, is trading near highs.

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Since Feb. 2, the index was up 8% through Monday.

Among exchange traded funds, the iShares MSCI Israel Capped Index Fund (ARCA:EIS) has been consolidating since July. Since hitting a low of 45.21 in early January, the fund is up about 7%. Its top holding is Teva Pharmaceuticals (NYSE:TEVA). Earnings and sales growth has slowed in recent quarters, but the stock is only 1% off its high as it carves a cup-shaped base with a 62 buy point.

There’s also the smaller Market Vectors Israel Fund (ARCA:ISRA). One of its top holdings is Check Point Software Technologies (NASDAQ:CHKP). The provider of Internet security software hasn’t looked back after a breakout over 72.88 in late October.

Group peer CyberArk Software (NASDAQ:CYBR) has been volatile after its September IPO at 16, but it’s still holding well above the offer price and an IPO base buy point of 43.59. A 62% gain is now 16%, but the stock is getting support so far at its 10-week moving average.

Networking firm Radware (NASDAQ:RDWR), meanwhile, is working on a V-shaped cup-with-handle pattern with a buy point of 22.76. One small problem is that the stock is trading below its 50-day moving average. Bases with the best potential generally form well above the 50-day line. Still, fundamentals are intact at Radware. It’s delivered four straight quarters of double-digit earnings and sales growth.

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