Greatest sale of Japanese stocks

Greatest sale of Japanese stocks

2021-06-21 • Dikemaskini

What happened?

Nikkei 225 has sharply dropped after the hawkish surprise from the Federal Reserve. The central bank claimed it might raise interest rates in 2023 (or even in late 2022) and also started a discussion on cutting bond buys. Well, that decision pushed the USD dollar up and pressed some stocks down. Which ones? Stocks that were favored in reflation trade or, in other words, those that benefited from higher inflation: value and cyclical stocks. The worst performers of the last week were banks and cyclical-heavy Japanese stocks.

The Japanese stock index Nikkei dropped by 4% – the most since April! It has a huge proportion of economically sensitive stocks, that’s why the hit was so hard. Uniqlo (Fast Retailing Co.), the clothing retailer, and the chip-equipment producer Tokyo Electron Ltd. dropped the most on the index. Besides, the slow vaccination pace in Japan and the dark outlook for the Tokyo Olympics pressed the stock index down as well. Still, the JP 225 is at the all-time highs. This drop may be just a healthy correction ahead of the further rally up.

Let’s look at the chart!

The JP 225 index is moving inside the descending channel. The long lower shadow of the last candle gives a bullish signal. The sentiment has started changing, and the stock index may rise to the 50-day moving average of 28,900. The breakout above this level will drive the pair to the last week’s high of 29,400. This resistance level won’t be broken on the first try as the stock index has failed to do that a few times. On the flip side, the move below the 200-day moving average of 27,500 will push JP 225 to the next round number of 27,000.

Read more about trading stock indexes in our special article

JP225Daily.png

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