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Nikkei 225 finds resistance at the 78.6% retracement level


The Nikkei 225 index declined for the second straight day as investors continued to worry about a second wave of coronavirus pandemic. The index is down by about 50 basis points and is trading at ¥22,336. Other indices in Asia are also little changed, with the Shanghai up by 0.13% and the Hang Seng down by about 0.50%.

Japan stocks fall as more companies get in trouble

Japan has been affected significantly by the coronavirus pandemic. As we reported yesterday, the country’s exports and imports declined by double digits in the previous month. Now, a new survey is showing how badly the companies have been affected. According to Corporate Survey, most companies say that they have taken steps like layoffs to pay cuts to stay afloat. 2 companies in every five have curbed new hiring, and slashed pay for the existing employees.

Also, 44% of the surveyed companies said that they have appreciated the government’s response to the crisis. This is even after the government launched two stimulus packages worth more than $2.2 trillion. The current survey comes at a time when Shinzo Abe’s popularity among the Japanese has dropped to a record low.

At the same time, most companies in Japan are now shifting to technology. Indeed, about 55% of the surveyed firms said that they expect most of their workforce to work from home for the foreseeable future.

The Nikkei 225 index also declined because of the rising number of coronavirus cases in China. According to the ministry of health, more than 130 new infections have been confirmed in the past few days alone. This risks a large-scale crisis for the biggest economy in the world.

Nikkei 225 top movers

The worst-performing company in the Nikkei 225 is NTT Corp, whose shares dropped by more than 5.46%. It was followed by Kawasaki Heavy Industries, Dentsu, Familymart, Alps Electric, and JTEKT among others. All these shares fell by more than 3%.

On the other hand, the best performing stocks in the index are Kawasaki Kisen, Yahoo Japan, Haseko, Mitsui, and Softbank Group. These shares rose by more than 2%.

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Nikkei 225 technical analysis

The daily chart shows that the Nikkei 225 index is down for the second straight day. The index has found substantial resistance at the important 78.2% Fibonacci retracement level. Also, it is above the 50-day and 100-day exponential moving averages. Further, the index is rising, as evidenced by the ascending trendline drawn by connecting the lowest levels on April 22, May 15, and June 15.

This means that the index will likely remain in this ascending trend provided that the price is above this trendline. If it does, bulls will be targeting the important resistance level above ¥23,000.

On the flip side, a move below ¥21,500 will invalidate this prediction. This price is at the intersection of the ascending trendline and the important psychological level.

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