Long Nikkei 225 futures setup into US tech earnings
Nikkei 225 futures bounced strongly from the 50-day moving average overnight, mirroring the reversal in US equities during the session. With horizontal support located nearby at 39455, it provides a decent long setup, allowing for a stop to be placed below for protection targeting a push back towards the record highs struck earlier this month. While it would have been nice to have seen the overnight candle print as a bullish engulfing, there is still time during Tuesday’s day session to generate a bullish signal.
Adding to the case to consider longs, the downtrend in RSI has been broken, signaling a possible easing in bearish price momentum. MACD is yet to confirm to the signal, underlying the need for focus on position sizing and capital protection. Earlier in July, the price did a lot of work either side of 41000, making that a potential initial trade target. Beyond, 41600 and the record high of 42500 will be in focus.
Should the trade work in your favour, consider using a trailing stop or raising your stop to entry level to provide a free hit on upside.
As for obvious risks to consider, intervention from the BOJ to strengthen the Japanese yen would have negative implications for exporter earnings, creating downside risks for the Nikkei. However, with key inflation and GDP data arriving later in the week, such a move appears unlikely in the near-term. Tech earnings from Alphabet and Tesla after market close on Wall Street on Tuesday will also be important, likely flowing through to the performance of Japanese equities.
DS
Adding to the case to consider longs, the downtrend in RSI has been broken, signaling a possible easing in bearish price momentum. MACD is yet to confirm to the signal, underlying the need for focus on position sizing and capital protection. Earlier in July, the price did a lot of work either side of 41000, making that a potential initial trade target. Beyond, 41600 and the record high of 42500 will be in focus.
Should the trade work in your favour, consider using a trailing stop or raising your stop to entry level to provide a free hit on upside.
As for obvious risks to consider, intervention from the BOJ to strengthen the Japanese yen would have negative implications for exporter earnings, creating downside risks for the Nikkei. However, with key inflation and GDP data arriving later in the week, such a move appears unlikely in the near-term. Tech earnings from Alphabet and Tesla after market close on Wall Street on Tuesday will also be important, likely flowing through to the performance of Japanese equities.
DS
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