The Nikkei 225 index is down by 0.15% today as traders react to the increasing number of Covid-19 cases globally and the fading optimism of a stimulus deal in the US. Investors are also reacting mildly to a domestic economy speech by Yoshihide Suga. It is trading at ¥23,470, which is slightly below the important resistance level at ¥23,715.
The biggest concern among investors is that the number of cases, particularly in Europe, has continued to rise. The latest numbers show that Germany confirmed more than 8,000 cases yesterday, down from the previous 9k. The UK confirmed more than 20,000 cases while Spain confirmed more than 19,000 cases.
The rising cases in Europe is a bad thing for companies in the Nikkei 225 because of the important role Europe plays to Japan’s economy. For example, in 2019, Japan and the European Union did trade worth more than $120 billion. Therefore, if there are more lockdowns, the implications is that Nikkei stocks will sell fewer goods.
Investors are also reacting to a speech by Yoshihide Suga, the new prime minister. In his address, he mentioned several things aimed at stimulating the local economy. Among the most notable actions will be on agriculture, tourism, and digitisation. Still, most of the policies he reiterated were the same as those implemented by Shinzo Abe.
Meanwhile, the Nikkei 225 is falling because investors have resigned to the fact that the US will not have a stimulus deal before the election. It is also reacting to news that industrial profits in China continued to do well.
The best performing stock in the Nikkei index is Canon, whose shares are up by more than 7.8%. The shares rose after the company reported a third-quarter profit of $157.2 million. It is followed by Seiko Epson, Yahoo Japan, and Yamato Holdings that are all up by more than 5%. On the other hand, the worst performers are Isetan Mitsukoshi, Fuji Electric, Chiyoda, and Hitachi Construction, among others.
The Nikkei is not the only Asian index in the red. In Hong Kong, the Hang Seng has fallen by 0.85% while in South Korea, the KOSPI has declined by 0.75%. In China, the China A50 index has fallen by 0.60%.
Nikkei 225 technical outlook
The four-hour chart below shows that the Nikkei 225 index has been in a tight range recently. This has seen its volatility, as measured by the Average True Range (ATR) decline to the lowest level since January. The price has also formed an ascending triangle pattern that is shown in blue. Notably, this triangle is reaching its level of confluence.
Therefore, with volatility low and with this triangle happening, it means that a breakout is nearing. Although it will happen in either direction, a rising triangle is usually a sign that it will move out higher.
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Nikkei index technical chart
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