Day five: our potential Japan 225 trade

I continue to hold a long Japan 225 bias and feel the risk is we see further upside in this index.


Following on from my potential trade idea yesterday, having printed a higher high after breaking above the June 9 high last Thursday, we saw the index subsequently sell-off to test the June 9 high and a wave of buying came into the index. The 20-day moving average is also headed higher and thus as long as price stays above this level we should see the short-term trend high continue.

I would look for a renewed push the top Bollinger band in the short term (see attached chart) and thus feel placing a profit target on my idea at 15,470 (just below the top Bollinger Band) could be prudent.

I am not convinced that today’s Japanese inflation data will have a significant impact on either the Japan 225 index or USD/JPY. We need to remember that while the national CPI (ex-food) print is expected to tick up to 3.4%, two percentage points of this can be attributed to the April sales tax. Thus, if we see a number of 3.2% or less there could be calls from the JPY bears that the BoJ should be more aggressive and thus the Japan 225 index could find buyers. We also get retails sales data 20 minutes later. Will bad news be good news for the Japanese index?

Traders could look to place stops around 15,020.

Click on chart to enlarge.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.