Nikkei likely to dip as charts sour

TOKYO (BestGrowthStock) – Japan’s Nikkei average is likely to dip on Friday as profit-taking continues amid souring near-term technicals and concern about the pace of U.S. economic growth, with a stronger yen adding some downward pressure.

Wall Street ended flat after spending much of Thursday in negative territory after an unexpected fall in regional factory activity and a third straight month of decline in producer prices raised concerns about deflation, cooling enthusiasm for the strong start to the earnings season. (.N: )

JPMorgan Chase & Co (JPM.N: ) reported quarterly earnings that beat expectations, but offered a cautious outlook on the economy.

Market players said that Tokyo trade was likely to be quiet as investors sidelined themselves ahead of a long holiday weekend. Markets will be closed on Monday.

“Short-term, some indicators still give a sense that the market may be overstretched, so it’s still an environment that encourages a bit of profit-taking,” said Hiroichi Nichi, general manager at the equity division of Nikko Cordial Securities.

“The fundamental trend of the market remains upward, but at this point it’s taking a bit of a breather after recent gains, with the biggest factor likely to be currency moves.”

The U.S. dollar fell broadly on Thursday and the euro soared to a two-month high after the soft data added to concern about the U.S. economy. (FRX/: )

In early Asian trade the dollar was flat against the yen at 87.38 yen after falling more than 1 percent the day before, with the euro down 0.1 percent to 112.92 yen.

Exporters were likely to lose ground as a result, market players said. Investors fret about a stronger yen since it eats into exporter profits when repatriated.

Nippon Telegraph and Telephone Corp (NTT) (9432.T: ) may come in for attention after it said on Thursday that it is buying South African IT firm Dimension Data (DDTJ.J: ) for up to 2.12 billion pounds ($3.2 billion) to expand into overseas markets, including in fast-growing Africa.

Nikkei futures traded in Chicago closed at 9,645, just below the Osaka close of 9,670, and market players said it was likely to move between 9,550 and 9,750. It closed at 9,685.53 on Thursday.

But momentum indicators are mixed, with the Nikkei’s slow stochastic — a measure of how oversold the market is and whether it is in a short-term up or down trend — falling to just below overbought territory, indicating a near-term dip is likely to be in store. Yet its MACD continues to rise after a bullish cross.

Resistance for the Nikkei stood near 9,760, a level where a downward trendline, drawn from the April 27 and June 21 peaks, comes in.

STOCKS TO WATCH

— Sanyo Electric (6764.T: )

Sanyo said on Thursday it would sell its loss-making chip unit to ON Semiconductor (ONNN.O: ) for about 33 billion yen ($373 million) as it focuses on strengths such as environmentally friendly technology.

— Mitsui & Co (8031.T: )

BP said on Thursday that no oil was leaking from its blown-out well for the first time since the accident began in April. Mitsui & Co owns 10 percent of the well.

— Honda Motor Co (7267.T: )

Honda will stop selling two of its longstanding brands, the Legend and the Elysion, and will phase out the gas-powered Civic in the domestic market to focus on green vehicles and low-priced cars, the Nikkei business daily said.

The carmaker will sell only the hybrid version of the Civic in Japan.

— Inpex (1605.T: )

London-listed SOCO International (SIA.L: ) has sold a 20 percent stake in a Congolese oil block to Inpex for $25 million, SOCO said on Thursday.

Nikkei likely to dip as charts sour