Is this a massive crab pattern?Japan recently officially announced a recession and then the BoJ raised interest rates for the first time in 17 years.
Which, of course, means Nikkei makes a new high for the first time in 30 yrs.
Because nothing is ever allowed to make any sense.
But maybe this is a massive crab pattern...
Which would make this a massive high.
Could be a larger expression the same type of pattern have have in SPX.
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If this fails, then it may be time to seriously consider the mega bull forecast I put out previously. I went long this in 2022 but got out while we were close to the high.
If the bear patterns fail, the case for a brand spanking new trend leg in Japan equities is viable.
But huge risk area here.
JP225 trade ideas
NIKKEI225 : THE BoJ ENDS THE NEGATIVE RATE ERA- The Japanese benchmarks has been registering higher highs and lows since 2023, the long-term trend is therefore bullish.
- Since the bullish breakout of the flag pattern, prices have accelerated to a new all-time high at 40,470pts.
Since then, the market pulled-back over 38,525pts, mostly driven by profit taking following a sharp rally, as well as anticipation of an hawkish monetary move from the BoJ.
Both 13 and 21 period moving averages remain bullish and the MACD indicator stays well-oriented in buying zone, with no sign of a bearish divergence so far.
- On one hand, it would be understandable to expect a little correction, or lateral consolidation following the strong acceleration prices have registered since the beginning of 2024, especially as the market now trades in uncharted territory.
However, technical indicators don't show any sign of a slowdown to come so far, and the final objective given by the flag pattern consolidation hasn't been reached yet.
In addition, the market has surprisingly reacted quite well to the BoJ's first rate hike in 17 years, probably because of a "sell the rumor and buy the news" phenomenon.
Investors and analysts are now split regarding the next rate hike from the Bank of Japan, which means that any hawkish hints or wording during the next meeting could significantly put pressure on the market.
On the other hand, if BoJ Governor Kazuo Ueda maintains an overall dovish stance, this could further fuel the rally on japanese stocks.
For now the 41,400pts target remains valid if the market manages to clear the last 40,470pts resistance, and an extension towards 43,800pts is also a possibility.
Pierre Veyret, Technical Analyst at ActivTrades
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If Boj decided to up its rate, nikkei could see more down sideello fellow traders , my regular and new friends!
Welcome and thanks for dropping by my post.
simple as that as mentioned in title. :)
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Nikkei 225 Long Looking to long the Nikkei from 38750.
Indices are pushing strong at the moment across the board, and there is no reason yet to be bearish until a drastic shift in structure or in the fundamental outlook globally.
Stop Loss on this position will be: 250 points to cover the H12 50MA
Looking to take profits above the high for continued strength.
Confluences:
38% fibo, first time the bullrun has touched this*
Intra KL/KL
H1250MA
JPN225 LongPrevious long area did not the support the JPN225 therefore interest is now aligned to the next area of long interest in the JPN225.
COT data released Friday, shows us that institutions have been adding long positions to the JPN225 suggesting there is still a potential for a higher movement.
Confluences for this area of interest to long:
Big 23.6% fibo
Retest of the trendline previously broken
Key Level present
As well as the psychological number 38000
My position: Looking to long from 38177
SL of 200 points
Take profits gradual at 1:2 & 1:3
Catch you later traders ▲
Short term long and possibility of a reversalAfter studying JPN chart for good amount of time, I came to conclusion that the price will go up in the next few days then, there's a high probability of reversal. After going up steadily for two months, the price has broken the structure and made L, LL and LH in all major TFs. The RSI showing a strong reversal divergence in M, and W and interestingly, bullish continuation from D all the way to 1H.
Nikkei to continue in the uptrend?NIK225 - 24h expiry
We are trading at overbought extremes.
A lower correction is expected.
The bias is still for higher levels and we look for any dips to be limited.
We therefore, prefer to fade into the dip with a tight stop in anticipation of a move back higher.
Further upside is expected although we prefer to buy into dips close to the 38910 level.
We look to Buy at 38910 (stop at 38710)
Our profit targets will be 39410 and 39510
Resistance: 39626 / 40000 / 41000
Support: 38415 / 37940 / 37020
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Nikkei225 surpasses ‘Historic Milestone’ on mixed inflation signOn Friday, the rising sun market surpassed a significant milestone at 38,957.44 points, surpassing the 1989 trading level , just before the so-called "Lost Decade". During the period from 1991 to 2001, Japan experienced economic stagnation and price deflation, from which it emerged, albeit at a slower pace compared to other industrialized nations. In terms of core (year-on-year) inflation, Japan has maintained levels above the Bank of Japan's 2% target since November 2022, reaching a peak of 4.3% in September 2023, the highest in 42 years. However, a softening has been observed in December to 3.7%, with forecasts suggesting a further drop to 3.2% in January 2024, following 20 years of economic policies known as "Abenomics". This trend has led to a slight depreciation of the yen against the dollar (JPYUSD) , especially following data on Japanese inflation, projected at 1.8% next Tuesday versus 2.6% previously. This outlook could reinforce the anti-easing stance of the Bank of Japan, the most reluctant and cautious among central banks in developed markets.
As for the 30-year Japanese Bond, a slight revaluation of 0.72% has been observed, coinciding with US bank data that pushed the index to highs. Rebound levels are at 33,905.71 and 30,509.91 points, with key support at 24,396.24 points, reached in March. Japanese tapering policies are likely to continue to underpin the index higher as the country's debt is reduced. In the long term, an uptrend is expected, although a prior adjustment around 39,636.65 points is not ruled out. Currently, the RSI indicator points to an overbought level of 75.05%, which could indicate the need for an adjustment in the short term to form the aforementioned rebound.
Ion Jauregui - AT Analyst
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
Firepower abounds for Japanese equitiesJapanese equities ended 2023 on a high note. Japan’s post pandemic re-opening, accommodative monetary stance, high equity risk premiums and improving corporate governance reforms were important tailwinds for Japanese equities in 2023.
Over the last 12 months Japan has benefited from global investor inflows who are diversifying their investments in Asia, with geopolitical tensions and sluggish growth causing a rotation from China to Japan. There are several catalysts in place to fuel Japan’s equity market rally:
Increasing capex & higher wage growth
Revamping the Nippon Individual Savings Account (NISA)
Corporate Japan’s ongoing reform initiatives
Capex outlook bolstered by manufacturers
The end of deflation is a catalyst unique to Japan. The Bank of Japan’s (BOJ) December Tankan survey indicates manufacturers will continue to boost capex in fiscal 2024 to prepare for the next growth cycle. Manufacturers plan to increase capex in fiscal 2024 by 14.6%2. Higher cash holdings for Japanese corporates and labour shortages are important incentives to invest in automation over the long run. Japan is at a demographic crossroads. The employment conditions diffusion index (DI) highlights Japan’s labour shortage to be the worst in 30 years3. To compensate, companies will need to invest in improving productivity.
Demographics driving wage inflation
At the same time, waning labour supply owing to an aging population is likely to bring back wage growth. The spring wage growth negotiations in 2023 drove wages up by 3.6%4 (the highest level in 30 years) and 2024 could see a further rise. Demand continues to increase in healthcare and social welfare owing to increasing domestic demand. Strong wage growth remains the key to the sustainability of inflation and inflation is likely to influence investors choice of asset allocations. As long as Japanese equities continue to benefit from inflation, we believe it would be natural for funds to increasingly flow into Japanese equities.
Japan’s savings to investment drive
Japan is transforming into an asset management led nation under the leadership of Prime Minister Kishida. In an effort to unlock nearly US$14Trn of household financial assets tied up in cash deposits, Japanese leaders are embarking upon reforms, like the introduction of 401(k)s in the US back in the 1970s. This is being done with the introduction of a revised Nippon Individual Savings Account “NISA” program offering tax benefits and portability. Starting in 2024 maximum investment amounts allowed under NISA have been increased and investors can enjoy the system’s tax benefits permanently.
Japan’s wave of reform
Corporate Japan’s ongoing reform initiatives, which include the Tokyo Stock Exchange’s (TSE) March 2023 announcement dubbed the “Price to Book (PBR) Guideline”, discussed here had a strong impact on companies. This was evident from the immediate rise in payout ratios following the announcements. By the end of January, the TSE plans to provide a list of companies that have either disclosed capital efficiency measures or have such measures under consideration. There is a strong likelihood that companies ‘under consideration’ could surprise on the upside with capital return announcements in the upcoming results season.
Japan’s wave of reform
Corporate Japan’s ongoing reform initiatives, which include the Tokyo Stock Exchange’s (TSE) March 2023 announcement dubbed the “Price to Book (PBR) Guideline”, discussed here had a strong impact on companies. This was evident from the immediate rise in payout ratios following the announcements. By the end of January, the TSE plans to provide a list of companies that have either disclosed capital efficiency measures or have such measures under consideration. There is a strong likelihood that companies ‘under consideration’ could surprise on the upside with capital return announcements in the upcoming results season.
Japan continues to deliver strong earnings results
Japan’s economy has continued to recover, and we expect the economy to withstand the modest slowdown in global growth. Japanese equities are testing 34-year highs in 2024, bolstered by 2Q FY3/24 earnings results. Net income for Japanese equities came in 6.2% ahead of consensus, with beats concentrated in domestic-oriented sectors including utilities & food/household products5. Corporate reforms had a significant impact on chemicals and auto parts sectors. Japan’s earnings revision breadth remains in positive territory in contrast to earnings trends in China and Europe. Positive earnings revisions alongside a structural trend to rising return on equity (ROE) is supporting Japan’s equity outperformance versus the rest of the world.
Monetary policy likely to stay on hold until Q2
An important concern in 2024 remains the path of monetary policy by the BOJ, its impact on the yen and the repercussions for Japanese equities. Governor Ueda told Prime Minister Kishida that the Bank will monitor the strength of domestic demand, taking into consideration whether higher wages push services prices higher and the 2024 wage outlook. Recent inflation data continues to slow, as the prior high import costs work through the system amidst soft domestic demand. We expect the BOJ to exit negative interest rates in Q2, taking into consideration the spring wage negotiations. The yen may appreciate in H2 2024, on narrowing US-Japan interest rate spreads. A stronger yen could renew concerns over a possible negative effect on Japanese corporate earnings. However, a strong yen may not be too much of a hindrance to Japanese equities, with the market set on the theme of further vitality in the economy with rising wages and improving capex.
Sources
1 Factset, WisdomTree as of 31 December 2023
2 Bank of Japan, 13 December 2023
3 Bloomberg as of 31 December 2023
4 Japanese Trade Union Confederation (Rengo)
5 IBES, Factset, MSCI Japan
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