Nikkei 225 Index is Not Out of the Woods Yet – Chart

The Nikkei 225 index rebounded on Wednesday as investors cheered the ongoing Japan earning season. The index rose by more than 140 points and is trading at ¥28,000. It is still about 8.67% below its highest level this year.

Japan stocks rebound

Most Japan stocks in the Nikkei index were in the green today as the country intensified its Covid vaccination drive. The country has already vaccinated more than 100 million people and is now shifting its focus to the youth. This is notable since Japan’s recovery will depend mostly on how fast its population is vaccinated.

The index is also rising after the relatively strong results from some key companies. On Tuesday, Softbank published its quarterly results that were dragged down by its exposure to Chinese companies like Alibaba and DiDi. The company said that it will pause making Chinese investments for now.

In total, its profit declined by about 39% in the second quarter. In a statement, Masayoshi Son said that he will also make personal investments with the Vision Fund.

The Nikkei 225 index rallied also after the US Senate passed the $1 trillion infrastructure. Analysts expect that some of the Japanese companies with exposure to the US will benefit from this spending. These firms include Kobe Steel and Kawasaki Kisen Kaisha.

The top movers in the index were Toho Zinc, Taiheiyo Cement, Suzuki Motor, Bridgestone, and JFE Holdings. Their share prices jumped by more than 5%. The top laggards in the index were Advantest, Japan Steel Works, Tokyo Electron, and Kirin Holdings.

Nikkei 225 technical analysis

The  daily chart shows that the Nikkei 225 index has been in a strong bullish trend lately. However, the index is still substantially lower from its YTD high. It has also formed a falling channel pattern that is shown in black. A closer look shows that the current price is slightly below the upper side of this channel. 

Also, we see that this channel is part of a bullish flag pattern. Therefore, in the near term, the index will likely remain in this range and then rebound above the YTD high of ¥30,670 in the longer term. However, a drop below the support at ¥27,000 will invalidate this view.

Nikkei 225