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Nikkei 225 breaks key resistance as Abe declares victory on coronavirus


Japan stocks surged a day after Shinzo Abe declared victory on the coronavirus pandemic. The Nikkei 225, which is made up of the biggest companies in Japan rose by more than 2.65%. It is now trading at ¥21,245, the highest it has been in more than ten weeks.

Japan ends state of emergency

The Nikkei 225 index rose a day after the government ended the state of emergency in Tokyo. In a statement, Shinzo Abe said that the “Japanese model” had trounced the disease. In the model, he meant that the country did not implement the shutdowns implemented by other countries.

Official data show that the number of daily infections has been on a downward trend. The total number of infections has risen to more than 16,000 while the number of deaths has increased to 830. However, things have changed in the recent past. For example, only 30 new infections were reported yesterday. That was lower from the peak of 743 in April. Also, the number of active cases has been on a sharp decline, falling from a high of more than 11,000 to the current 2,139.

Still, Japan is facing its worst financial crisis in decades. The economy contracted in the first quarter after falling in the fourth quarter of 2019. Also, analysts expect the second quarter contraction to be significantly worse.

Best and worst-performing companies in Nikkei 225

Most companies in the Nikkei 225 index were in the green today. In fact, the only companies in the red were Fujikura, Comsys, Ajinomoto, Rakuten, CyberAgent, Astellas, Sony, Fujitsu, and Sumitomo Metal Mining. Fujikura, whose shares fell by almost 5 per cent was the worst-performing company.

On the other hand, The Japan Steel Works was the best-performing stock, rising by more than 13%. Other best-performers were IHI Corp, West Japan Railway, JTKETK, Alps Electric, and Hitachi Zosen. All these rose by more than 7%.

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Nikkei 225 index technical outlook

The Nikkei 225 moved above the important resistance level of ¥21165 today, a signal that bulls are now in total control. This resistance was along the 61.8% Fibonacci retracement level. It was also along the 100-day exponential moving average. Therefore, I expect bulls to target the next resistance at the 61.8% retracement at ¥22,500, which is the 78.6% retracement level.

On the contrary, a slide below ¥20,238 will invalidate this prediction. This price is along the 50% Fib and is slightly below the 50-day EMA.

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