Nikkei Forecast August 4, 2015, Technical Analysis
The Nikkei initially fell during the course of the session on Monday, testing the ¥20,400 level for support. We did in fact find it there, and bounced significantly enough to form a hammer. The hammer of course is one of the more bullish candlesticks that you can find, and with that we are buyers on a break above the top of the range for the session on Monday. Yes, we recognize that there is a lot of noise above, but quite frankly this is a market that is well supported overall.
You have to keep in mind that the Bank of Japan continues to implement liquidity measures in order to bring down the value of the Yen, and therefore bring up the value of the export laden Nikkei. The Nikkei 225 is heavily influenced by the export market coming out of Japan, as companies such as Sony, Mitsubishi, and Canon all send massive amounts of goods outside of Japan. With that, you have to keep in mind that the lower the value of the Yen, the better off the Nikkei does.
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On top of that, you have to keep in mind also that the Bank of Japan actually will step into the Nikkei, and start buying ETFs in order to push the value of the market higher. With fact, it’s very likely that the markets will continue to go higher every time they pullback, because quite frankly the central bank probably at this point in time as traders in Tokyo trained that the markets will be supported every time they fall with any significance.
The ¥20,000 level below should be psychologically important as well, so regardless what happens, we believe that the markets will continue to find buyers in that general vicinity. We do believe that we will break out above the ¥21,000 level eventually, and then head towards ¥25,000 given enough time. With this, we are very bullish of the Nikkei, but realize that the choppy nature of the markets right now might make it easier to trade via the CFD markets, or perhaps ETF market.
