Nikkei claws up, gains limited by profit-taking

* Nikkei edges up, but profit-taking pares gains

* Investors wary ahead of Europe bank “stress test” results

* Technicals suggest dip may be nearing end

* Next target 9,600, roughly level of 25-day MA – analyst

By Elaine Lies

TOKYO, July 21 (BestGrowthStock) – Japan’s Nikkei average clawed
higher on Wednesday, but gains were limited by profit-taking amid
lingering doubts over the momentum of the U.S. economic recovery.

While charts suggest the Nikkei’s recent dip may be coming to
an end, a number of lacklustre U.S. indicators including
Tuesday’s housing starts are keeping investors wary over the
longer-term, with few willing to actively buy before Japanese
earnings pick up steam next week.

New U.S. home construction hit its lowest level in eight
months in June, further evidence that the U.S. economy lost
momentum in the second quarter, but a rise in building permits
offered hope of a pickup in homebuilding. [ID:nN20249501]

“While external factors are not necessarily bad, there have
been a number of U.S. indicators coming in below expectations,
and this has produced a lot of uncertainty about the U.S.
economic recovery,” said Noritsugu Hirakawa, a strategist at
Okasan Securities.

“Investors are reluctant to move ahead of the results of the
European bank stress tests, and then from next week Japanese
earnings pick up. So I think we’ll probably move sideways for the
rest of the week.”

The results of the stress tests, both the aggregate outcome
and that of individual banks, will be released on Friday.
[ID:nLDE6601T6] [ID:nLDE660160]

The market is also waiting for Fed Chairman Ben Bernanke’s
semi-annual testimony before Congress on Wednesday and Thursday,
with investors looking for any comments that could boost
speculation about more monetary accommodation — speculation that
helped boost Wall Street on Tuesday.

The benchmark Nikkei (.N225: ) inched up 0.3 percent or 23.61
points to 9,324.38, while the broader Topix (.TOPX: ) edged up 0.1
percent to 833.

“The Nikkei might rise enough to erase yesterday’s losses,
but activity is likely to be limited mainly to day traders, who
will buy at the lows and then move to take profits at any highs,”
said Kenichi Hirano, operating officer at Tachibana Securities.

“The market now appears to be consolidating in a 9,100 to
9,500 range, after which it could perhaps break above 9,500. But
this will take time.”

Resistance is strengthening at the level of the Nikkei’s
25-day moving average around 9,600, Hirakawa said. The 25-day
moving average is a proxy for a one-month moving average and
closely watched in Japan.

“To get above this we need to make it through events like the
stress tests, and then also start seeing good Japanese results,”
he added.

In a sign that the recent dip, which saw the Nikkei lose 1.8
percent last week, may be coming to an end, the Nikkei’s MACD has
narrowly avoided a bearish cross and appears to be levelling out.

Its slow stochastic — a measure of how oversold the market
is and whether it is in a short-term up or down trend —
continues to fall, but now is deep within oversold territory.

SHIPPERS STEAM HIGHER

Hopes for robust earnings were enough to send some shares
higher.

Mitsui O.S.K. Lines (9104.T: ) gained 1.6 percent to 575 yen
after the Nikkei business daily said the shipping firm likely had
a pretax profit of roughly 36 billion yen ($412 million) in the
April-June quarter compared to a loss of 11.4 billion a year
earlier, with its containership business in the black for the
first time in seven years.

Rival Kawasaki Kisen K.K. (9107.T: ) rose 0.6 percent to 360
yen. The paper said it likely marked a pretax profit of around 18
billion yen, against a loss of 22.7 billion yen a year earlier, a
figure that would help it surpass its first half profit outlook
of 14 billion yen.

Sharp Corp (6753.T: ) extended gains to rise 1.5 percent to 972
yen after saying on Tuesday it would enter the electronic reader
and book markets, hoping to grab a slice of the hot but
increasingly crowded sector popularised by Apple Inc (Read more about Apple stock future.) (AAPL.O: ) and
Amazon.com (AMZN.O: ). [ID:nTOE66J04I]

Investing

Sharp shares had ended the previous day up 1.5 percent after
the news.

Nikkei claws up, gains limited by profit-taking