Nikkei dips 0.1 percent, charts point to further fall

By Masayuki Kitano

TOKYO (BestGrowthStock) – Japan’s Nikkei average dipped 0.1 percent on Tuesday, a day after its biggest percentage loss in two months, with technical charts suggesting it may pull back further in the wake of its recent rally to an 18-month high.

The Nikkei spent much of the day in positive territory, initially getting some respite after Monday’s 1.7 percent slide.

But that rise came in low trading volume, a sign the bounce lacked momentum, and the benchmark later gave up its gains.

“There was some selling in futures in 500-contract lots … That helped drag the Nikkei into negative territory,” said Hideki Horikawa, senior adviser at Himawari Securities’ investment advisory division.

The Nikkei fell 8.09 points to 10,900.68.

The broader Topix index edged up 0.1 percent to 972.11.

Trading activity was subdued, with volume on the Tokyo exchange’s first section falling to a two-week low of 1.95 billion shares.

Advancing shares outnumbered declining ones by 870 to 646.

Despite the Nikkei’s fall, carmakers rose, with Isuzu Motors surging 4.6 percent to 274 yen after it raised its outlook and Suzuki Motor gaining 0.9 percent to 1,946 yen following a report that it plans to boost output in India.

BEARISH TECHNICAL SIGNALS

Market expectations for a sharp improvement in corporate earnings this financial year were seen likely to lend support.

“Corporate earnings are good and you also see stories talking about how they might beat expectations,” said Tsutomu Yamada, market analyst at kabu.com Securities.

“It’s hard to imagine the market will cool down too rapidly,” Yamada said.

The Nikkei fell below its 25-day moving average of around 11,050 this week, however, pointing to the possibility of a further correction in the near term. That came after MACD, another technical indicator, turned bearish last week.

Initial support lies near 10,800, roughly a 38.2 percent retracement of a two-month rally that started in early February and pushed the Nikkei up to an 18-month peak of 11,408.17 in early April. Below that a 50 percent retracement of that same rise lies roughly around 10,600.

The 25-day moving average now serves as resistance, and charts of the Nikkei also show gap between Tuesday’s high of 10,999.57 and Friday’s low of 11,084.72, meaning levels in between are a resistance area.

With Japanese corporate earnings results set to move into full gear from next week, the market is growing increasingly attentive to earnings reports and forecasts.

Shares of Omron Corp rose 2.2 percent to 2,142 yen after the maker of control equipment for factory lines raised its profit and sales forecasts for the year ended March 31 on improved economic conditions and higher capital spending by its clients.

Omron said it now expects to post an operating profit of 13 billion yen ($140.6 million) for the year ended March 31, 3 billion yen higher than its previous forecast. It lifted its sales estimate by 1 percent to 524 billion yen.

($1=92.43 Yen)

(Additional reporting by Elaine Lies; Editing by Michael Watson)

Nikkei dips 0.1 percent, charts point to further fall