Nikkei set to snap 3-day losing streak

TOKYO (BestGrowthStock) – Japan’s Nikkei is likely to snap a three-day losing streak after Wall Street rose, but gains may be limited after a drop in U.S. housing starts fed concerns about the health of the economic recovery.

Wall Street climbed after initial selling on concerns over quarterly results, with speculation that the Federal Reserve might take steps to spur lending helping bolster the market ahead of Fed Chairman Ben Bernanke’s Congressional testimony on Wednesday.

“The Nikkei may well 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.”

The Nikkei shed 1.2 percent on Tuesday, its third consecutive day of losses. On Friday it fell nearly 3 percent, its worst one-day percentage fall in over a month.

Investment bank Goldman Sachs (GS.N: ) helped lead Wall Street higher despite quarterly earnings tumbling 82 percent, steeper than forecast, as bargain hunters emerged to snatch it up, along with beaten-down home builders and raw materials companies.

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

After the bell, Apple Inc (Read more about Apple stock future.) (AAPL.O: ) reported earnings that blew past forecasts, boosted by robust sales of Mac computers [ID:nN2096579]

Market players said the Nikkei was likely to move between 9,300 to 9,450, with short-covering in exporters expected after slides on Tuesday. It closed at 9,300.46 on Tuesday.

In a sign that shares are likely to rise, Nikkei futures traded in Chicago closed at 9,400, up 1.1 percent from the Osaka close.

But charts suggested a further dip may still lie ahead, with the Nikkei’s MACD, a measure of market momentum, nearing a bearish cross while its slow stochastic — a measure of how oversold the market is and whether it is in a short-term up or down trend — continued to fall.

However, the benchmark is also approaching oversold levels on some fronts. Its relative strength index (RSI) hit 40, its lowest in roughly two weeks, with anything from 30 and below considered oversold, and its slow stochastic was approaching oversold territory.

Wall St rises on Goldman, Apple up late (.N: ) > Euro slips form 10-week high vs dollar (USD/: ) > Bonds flat as stock gains offset economic fears (US/: ) > Gold rises 1 pct on technicals, uncertainty (GOL/: ) > Oil up amid equities bounce, storm worry (O/R: )

STOCKS TO WATCH

— Sharp Corp (6753.T: )

Sharp said on Tuesday it would enter the electronic reader and book markets, hoping to grab a slice of the hot but increasingly crowded sector popularized by Apple Inc (Read more about Apple stock future.) (AAPL.O: ) and Amazon.com (AMZN.O: ).

— Eisai Co (4523.T: )

Eisai plans to being manufacturing its Aricept Alzheimer’s drug in India for exports to Japan, the United States and Europe as early as 2011, the Nikkei business daily reported.

— Mitsui O.S.K. Lines (9104.T: ), Kawasaki Kisen K.K. (9107.T: )

Mitsui O.S.K. Lines likely had quarterly group pretax profit of roughly 36 billion yen 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, the Nikkei business daily reported.

Rival Kawasaki Kisen also likely marked pretax profit of around 18 billion yen compared to 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.

Sock Market Analysis

Nikkei set to snap 3-day losing streak