Nikkei dips on profit-taking after 18-month highs
Wednesday, 7 April 2010
TOKYO, Apr 6 (Reuters): Japan's Nikkei average fell 0.5 per cent Tuesday as profit-taking emerged after successive days of 18-month highs, with exporters such as Canon Inc losing ground on a slightly stronger yen.
Analysts said the decline would be limited on growing prospects of a sustainable global economic recovery, helped by Friday's strong US jobs report and reinforced by Monday releases showing services grew above expectations in March and pending homes sales rose more than expected in February.
The Nikkei had hit 18-month intraday highs for five straight sessions as of Monday. "There were some short-term signs of overheating, and on top of that the yen took a breather from its recent declines," said Yutaka Miura, senior technical analyst for Mizuho Securities. "For now it looks like this will be a short-term correction," Miura said.
The benchmark Nikkei fell 56.98 points to 11,282.32, backing off an 18-month intraday high of 11,408.17 hit Monday. The broader Topix lost 0.5 per cent to 990.79. Trading volume rose to 2.1 billion shares on the Tokyo exchange's first section, up from around 1.8 billion shares Monday. That was still below a three-week high near 2.4 billion shares reached last Thursday.
The Nikkei's retreat came after various technical signals suggested that the market's rally was overstretched. For example, the Nikkei's relative strength index rose to 76.3 as of Monday, the highest since late 2005 and well above the 70 threshold that shows the market is overbought. On daily charts, it had risen above its upper Bollinger Band during Monday's session, a move that can signal a correction.
"One factor was that the market had risen too much until yesterday," said Tomomi Yamashita, a fund manager at Shinkin Asset Management.
But other technical indicators, such as MACD and the daily Ichimoku chart, suggest that the rising trend remains unchanged. "Given that overheating has been a concern for several weeks now, and that the yen is a little bit stronger, people are using any excuse to lock in profits," said Masayoshi Okamoto, head of dealing at Jujiya Securities.
Analysts said the decline would be limited on growing prospects of a sustainable global economic recovery, helped by Friday's strong US jobs report and reinforced by Monday releases showing services grew above expectations in March and pending homes sales rose more than expected in February.
The Nikkei had hit 18-month intraday highs for five straight sessions as of Monday. "There were some short-term signs of overheating, and on top of that the yen took a breather from its recent declines," said Yutaka Miura, senior technical analyst for Mizuho Securities. "For now it looks like this will be a short-term correction," Miura said.
The benchmark Nikkei fell 56.98 points to 11,282.32, backing off an 18-month intraday high of 11,408.17 hit Monday. The broader Topix lost 0.5 per cent to 990.79. Trading volume rose to 2.1 billion shares on the Tokyo exchange's first section, up from around 1.8 billion shares Monday. That was still below a three-week high near 2.4 billion shares reached last Thursday.
The Nikkei's retreat came after various technical signals suggested that the market's rally was overstretched. For example, the Nikkei's relative strength index rose to 76.3 as of Monday, the highest since late 2005 and well above the 70 threshold that shows the market is overbought. On daily charts, it had risen above its upper Bollinger Band during Monday's session, a move that can signal a correction.
"One factor was that the market had risen too much until yesterday," said Tomomi Yamashita, a fund manager at Shinkin Asset Management.
But other technical indicators, such as MACD and the daily Ichimoku chart, suggest that the rising trend remains unchanged. "Given that overheating has been a concern for several weeks now, and that the yen is a little bit stronger, people are using any excuse to lock in profits," said Masayoshi Okamoto, head of dealing at Jujiya Securities.