ENY1! trade ideas
Nikkei (NKD_F) Looking to End Impulsive RallyShort Term Elliott Wave view in Nikkei (NKD) suggests pullback to 38136 on 3.12.204 low ended wave 4. Index then turns higher in wave 5. The rally from 3.12.2024 low is in progress as a 5 waves impulse. Up from wave 4, wave ((i)) ended at 39055. Pullback in wave ((ii)) ended at 38155 as a zigzag. Down from wave ((i)), wave (a) ended at 38310, wave (b) ended at 38740 and wave (c) lower ended at 38155. Index then resumed higher in wave ((iii)).
Up from wave ((ii)), wave (i) ended at 38650 and wave (ii) pullback ended at 38390. Wave (iii) higher ended at 39850 and pullback in wave (iv) ended at 39505. Final leg wave (v) ended at 40960 which completed wave ((iii)). Down from there, wave ((iv)) unfolded as a zigzag Elliott Wave structure. Down from wave ((iii)), wave (a) ended at 40490 and wave (b) ended at 40680. Wave (c) lower ended at 40025 which completed wave ((iv)). Nikkei has resumed higher in wave ((v)). Up from wave ((iv)), wave (i) ended at 40530 and dips in wave (ii) ended at 40275. Near term, as far as pivot at 38136 low stays intact, expect Index to extend higher.
Nikkei break out? - China's JapanificationThe recent Nikkei rally is bringing it ever closer to that "magical" 30,000 level which it hasn't touched since the late '80s collapse.
IFF a breakout occurs, expect a collapse in all XYZ/JPY pairs - since, true to form, every equity/hedge fund in the world is expected to pile in.
Internal Chinese (export/import) numbers are showing a fair pick up in exports - post Covid - BUT a very anemic internal demand, with import numbers steadily surprising to the down-side (by a lot!). Simultaneously Japanese heavy industry is racking up some solid numbers lately, especially in regard to steel, automobile and electronic components.
All of this is fueled by an abating chip shortage, giving world wide car production a boost.
E.g. Watch the Nikkei price action and fully expect a blinding YEN rally should that 30,000 level get blown away!
NIKKE 225 Analysis - Continuous, Just as the Markets !This is a Thread, so Follow for Technical Analysis performed with TrapZone Pro & UMVD Indicators.
* Trend is Based on TrapZone Color
* Bar Colors give us Momentum Green from strong Up Moves. Red Bars point to strong Down Moves.
* Red UMVD = Selling Pressure & Green UMVD = Buying Pressure. Purple is for Divergence = Battle of Supply & Demand
>> USE PAGE DN to go DOWN To the LATEST Post <<
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2-24-2024
Strong Upside Momentum with wide GREEN TrapZone established now and GREEN UMVD continues. Class A Entry at the top of the TrapZone.
Correlation between JPY strength and NIKKEIWe cannot treat the Japanese market similar to how we treat the west.
Traditionally, when a currency strengthen, the respective stock index will dip.
However, here we see that whenever USDJPY drops (aka JPY strengthens), the NIKKEI actually continues to rally or at least consolidates sideways.
Live Trades and Prime Trading Areas explainedIn the video I discuss a few live trades and the reasoning behind the entries. I also talk about the lead up price action that is important to note when managing the trades.
I then discuss the same basic concepts applied to price action on the DOW and where the prime entries were and reasons for them.
The basic concepts discussed are :
- Momentum
- Price Action
- Candle Analysis
- Multi-timeframe Analysis
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Nikkei ( NKD_F ) Elliott Wave View: Reacted from the Blue BoxNikkei NKD_F ended an impulse structure at 40565 high and we called wave 3 and the index started a wave 4 pullback. Down from wave 3, wave (i) ended at 40315 and wave (ii) ended at 40465. Wave (iii) lower ended at 39665. Rally in wave (iv) ended at 39895. The market resumes lower in wave (v) ended 39195 and completed wave ((a)) in higher degree. NKD did a bounce from this levels reaching at 39860 and turning down strongly. At 39860 it ended wave ((b)) correction.
Down from wave ((b)), wave (i) ended at 39405 and wave (ii) ended at 39860. Wave (iii) lower ended at 38160. Rally in wave (iv) ended at 38450. Index resumes lower into the blue box area completing wave (v) at 38140 low. Also completed wave ((c)) and wave 4 in higher degree as a zigzag Elliott Wave structure. Currently, NKD has reacted from the blue box developing an impulse as wave ((i)). As price action stays above 38140 low, we expect to end wave ((ii)) correction and then continuing with the rally or see 3 swings higher at least.
Japanese Equities Remain Compelling Despite Record Crushing RiseAnimal spirits are palpable in the Land of Rising Sun. Nikkei-225 smashed through it previous all-time-high set more than 40 years ago. Japanese equity markets have turned steaming hot over the past year after stagnation through lost decades.
Strong foreign investment inflows, positive impact from the corporate governance reforms, portfolio rebalancing away from China, and low valuations, are collectively serving as robust tailwinds for the Japan equity market.
Yet risks remain from an early BoJ policy pivot, high inflation eroding spending power, and limited domestic capital investment.
This paper delves into factors driving record rally of Nikkei-225 index, its outlook, and posits a hypothetical trade to benefit from its continued ascent.
WIDE RANGING REFORMS IN PLAY TO BOOST MARKETS. IS IT WORKING?
In 2022, the Tokyo Stock Exchange (“TSE”) embarked on market restructuring plan with the creation of new market segments.
Source: Tokyo Stock Exchange
TSE rolled out a raft of corporate governance reforms in March 2023. It summarized key initiatives that investors aspire to see into fruition, namely (a) Weigh the cost of capital from investors perspective, (b), Report profitability and valuation metrics from multiple perspectives, and (c) Allocate resources to improve corporate value.
Reforms aim to boost capital efficiency by utilizing excess cash reserves held by Japanese firms. Price-to-book ratio (“PBR”) is a key metric in TSE’s cross hairs. As of 31/Dec , more than half the firms that have submitted disclosures have a PBR of less than one. PBR less than one suggests that a firm’s dissolution value is greater than its market cap.
Data Source: TSE
Even among some of the largest firms in the country, PBR is less than 1.
Data Source: TV Stock Screener
A TSE Review shows that firms are allocating additional resources towards growth initiatives. It suggested share buybacks and dividends were effective means for improving profitability.
Impact of the reforms are visible in many ways. Higher shareholder returns (through dividends and buybacks) are already manifest across many firms.
Still, there is a long way to go. Disclosures and reforms are not widespread yet. As smaller firms join, capital investment could spread wider.
Data Source: TV Stock Screener
Also, while dividend growth is high, capex growth remains low. A focus on investor returns improves stock valuations in the near term. However, a larger push towards long-term capital investments will be required for long-term sustained growth.
Capital spending by firms surged 16.4% YoY in Q4.
Japan’s Prime Minister Fumio Kishida is pushing for its citizens to invest in domestic firms rather than save. He has re-launched the NISA tax-free investment programme. It provides extended tax-exemption periods and higher annual investment limits. The scheme, if successful, could channel large chunks of new capital into Japanese equities.
Domestic participation remains low for now. Japanese investors prefer foreign stocks over domestic ones as per a Morningstar study .
VIBRANT FOREIGN INFLOWS IN JAPANESE EQUITIES
While domestic investors are yet to embrace its domestic markets, foreigners are leading the charge. US investors have poured USD 8.3B into Japan focused ETFs ( AMEX:EWJ , AMEX:BBJP , and AMEX:DXJ ) since 2023.
JAPANESE EQUITIES REMAIN UNDERVALUED
Japanese equities remain under-valued. Warren Buffet famously invested USD 6 billion during the pandemic in Japanese trading giants citing that he was offered a “ridiculous price”.
Despite the recent market surge, P/E for stocks in the Nikkei-225 stands at mere 20.8x. Comparatively, stocks in the S&P 500 have an average P/E of 34.9x.
Data Source: TV Stock Screener
Nikkei-225 valuations are even more attractive when adjusted for growth. Average (excl. outliers) TTM PEG ratio for Nikkei-225 firms is 1.3x while for the S&P 500 its 2.5x.
Data Source: TV Stock Screener
Low profit growth remains a concern for Japanese firms. According to the Japan Ministry of Finance figures , ordinary profits rose by 13% YoY in Q4 2023, while high, that’s slower than 21% during Q3 2023.
JAPAN IS ALSO AN AI BENEFICIARY
Tokyo Electron, Renesas, and Advantest, constituents within the Nikkei-225 index have emerged as AI rush beneficiaries. Specifically, Tokyo Electron has surged more than 58% YTD. Softbank is another top performer thanks to its investment in $ARM.
Heatmap of Nikkei-225 with key firms that comprise a large weightage in the index highlighted in blue.
Nikkei-225 is a price-weighted index. Tokyo Electron commands the second largest weight in the index at 9.4% due to its high price. Advantest is third with 4.7%. Softbank ranks fourth with 4.45%. Therefore, a sustained AI fuelled market rally is likely to positively impacting the index.
Not just the chip stocks, the Nikkei rally has been top-heavy due to outperformance of other large stocks too. Fast Retailing (the top weight in the index) is also supported by strong tailwinds and solid financial performance which has clocked a 26% rise YTD (versus 19% jump in the index).
If outperformance among the large Japanese firms continue, the Nikkei will continue to race at a fast pace.
NIKKEI IS STARTING TO FACE HEADWINDS
Despite impressive performance and bright outlook, cause for concerns exist in the near term. Rising concerns that the BoJ may exit its loose monetary policy sooner than previously expected could snap the rally.
Inflation has started to rebound. Wage growth estimates are solid. Revised figures for capital spending are expected to show that the economy avoided a technical recession in Q4.
The benchmark index is starting to face resistance. An earlier than expected BoJ pivot could put brakes on this rally.
Some market participants expect the BoJ policy pivot as soon as the 19/March policy meeting. Most expect the pivot to occur at the 26/April meeting. A consensus on the exact meeting has not been reached among BoJ officials according to Bloomberg .
HYPOTHETICAL TRADE SETUP
Nikkei is benefiting from strong tailwinds. It also faces the risk of a near-term correction, particularly from anticipated strengthening of the Yen.
A hypothetical long position in the Yen denominated CME Nikkei-225 index futures with an entry upon near term correction is posited for a superior reward-to-risk ratio.
The following hypothetical trade setup comprising of a long position in the Nikkei-225 Yen Denominated futures expiring in June (NIYM2024) benefits in case the Nikkei-225 rises.
As the payout from the position is denominated in Yen, a strengthening of the Yen will serve as an additional boost to the dollar P&L.
• Entry: 37,900
• Target: 41,690
• Stop Loss: 35,000
• Profit at Target: ¥1,895,000 ( (41690 – 37900) x 500 Yen/index point)
• Loss at Stop: -¥1,450,000 ( (35000 – 37900) x 500 Yen/index point)
• Reward-to-Risk Ratio: 1.3x
MARKET DATA
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Nikkei Trading In An Impulse Sequence Favor Continuation HigherThe Short-Term Elliott Wave view in Nikkei (NKD_F) suggests that the rally from the 04 October 2023 low is unfolding in an impulse sequence favoring more upside to take place. In which the previous rally to 33780 high ended wave 1. Then a pullback to 32195 low ended wave 2. Up from there, the rally to 37010 high ended wave 3 & made a pullback in wave 4. The internals of that pullback unfolded in a double three structure. Whereas wave ((w)) ended at 35700 low. A bounce to 36290 high ended wave ((x)) and ended wave ((y)) at 35671 low. Thus completing wave 4 pullback.
Up from there, the index has made a new high already above 37010 high confirming the wave 5 higher. Also, the rally from the 35671 low is unfolding in an impulse sequence where lesser degree wave (i) ended at 36535 high as a diagonal. Down from there, a lesser degree pullback to 35835 low ended wave (ii) & started the next leg higher towards 37290 high to end wave (iii). Below from there, the index is doing a short-term pullback in wave (iv) towards 36789- 36567 area lower. From there, the index is expected to resume the upside or should produce a 3 wave reaction higher as long as the pivot from 35671 low stays intact.
Nikkei (NKD_F) Looking for Further Downside CorrectionShort Term Elliott Wave view in Nikkei (NKD_F) suggests that rally to 37014 ended wave 3. Wave 4 pullback is currently in progress as a double three Elliott Wave structure. Down from wave 3, wave (a) ended at 36060 and wave (b) ended at 36590. Down from there, wave i ended at 36115 and wave ii ended at 36425. Wave iii ended at 35910, wave iv ended at 36330, and final leg wave v ended at 35700. This completed wave (c) of ((w)) in higher degree. The Index then rallied in wave ((x)) with internal subdivision as an expanded flat.
Up from wave ((w)), wave (a) ended at 36290 and wave (b) ended at 35680. Wave (c) higher ended at 36410 which completed wave ((x)) in higher degree. The Index has turned lower in wave ((y)), but it still needs to break below wave ((w)) at 35700 to rule out any double correction. Down from wave ((x)), wave i ended at 35820 and wave ii ended at 36165. Expect the Index to see further downside to end wave (a) of ((y)) as an impulse. Then it should rally in wave (b) of ((y)) before turning lower again in wave (c) of ((y)) of 4. Near term, as far as pivot at 37014 high stays intact, expect rally to fail in 3, 7, 11 swing for further downside.
Major breakout RIGHT NOW in the Osaka Nikkei DowThe Osaka Nikkei Dow as I write this is undergoing a potential MAJOR chart breakout. Note that the 6-month right-angled broadening pattern breaking out has the same chart structure as the 3-year RABT completed in late 2020.
A move back below 33110 would force me to alter an extremely bullish view on Japanese equities.
Nikkei Futures (NKD_F) Reached Support AreaCycle from 10.4.2023 low in Nikkei Futures (NKD) is in progress as a 5 waves Elliott Wave diagonal. Up from 10.4.2023 low, wave 1 ended at 32690 and pullback in wave 2 ended at 30405. The Index extended higher in wave 3 towards 33870. Wave 4 ended as a zigzag structure. Down from wave 3, wave (i) ended at 33200 and rally in wave (ii) ended at 33835. Index extended lower again in wave (iii) towards 33195 and wave (iv) ended at 33585. Wave (v) lower ended at 32695 which completed wave ((a)).
Corrective rally in wave ((b)) unfolded as a zigzag structure. Up from wave ((a)), wave (a) ended at 32975 and pullback in wave (b) ended at 32850. Final leg wave (c) ended at 33465 which completed wave ((b)). The Index then extended lower in wave ((c)) as a 5 waves impulse. Down from wave ((b)), wave (i) ended at 33335 and wave (ii) ended at 33430. Wave (iii) lower ended at 32350 and wave (iv) ended at 32505. Final leg wave (v) ended at 32211 which completed wave ((c)) of 4. Wave 5 higher is currently in progress. As far as pivot at 32211 low stays intact, expect the Index to extend higher. Break below 32211 from here suggests the Index is still in the process of ending wave 4.
Which is the best market to invest in, Asian or European?Which is the best market to invest in, Asian or European?
Recent economic data do not bode well for Europe: the eurozone economy is expected to contract in the third quarter and not return to significant growth.
Despite having avoided a recession following the Russian invasion of Ukraine, the eurozone is struggling with several problems.
Rising energy prices, high financing costs, and falling demand in export markets such as China are straining the region's economy.
The European economy is currently going through a difficult phase of stalling.
According to the flash Composite Purchasing Managers' Index (PMI) for the eurozone, composed by S&P Global and considered a reliable indicator of overall economic health, we are below 50 points with a reading of 47.1.
This is a worrying figure that signals a negative economic condition in the region.
The manufacturing sector continues to be the main obstacle, with a steadily worsening order situation.
Due to high financing costs affecting the disposable income of indebted consumers, many are reducing their spending.
This is also reflected in the index of new businesses in the service sector, which fell to 46.4 from 46.7, reaching its lowest level since February 2021.
According to S&P Global, the two largest countries in the area led the decline in economic activity.
Although the crisis is easing in Germany, the situation is worsening in France.
It is well known that the German manufacturing sector has been going through a difficult period recently.
The French economy has suffered a setback, with both the service and manufacturing sectors deteriorating since November 2020.
Weak demand has been observed across the country, and confidence for the next 12 months has declined significantly.
The French economy is heading for difficult times.
Given the current economic conditions, I prefer not to invest in the U.S. (US 500) and European indices (DAX) at this time, mainly because of rising inflation and aggressive central bank policy.
Betting on the Italian market (FTSE MIB) is also risky.
Public debt in Italy is very high and is having a negative impact on bond yields, affecting debt costs.
With a debt-to-GDP ratio of over 140 percent, Moody's (NYSE:MCO) currently ranks Italy at Baa3, just one notch above junk, with a negative outlook.
Currently, I am focusing my investments on the Asian market, particularly the Nikkei 225 and Hang Seng index.
In Japan, inflation is under control and interest rates are negative.
In China, after eight years, the government has resumed buying stocks, and even if only slightly, we have seen a lowering of interest rates.
I also follow Bitcoin and mining companies closely.
With the possible approval of ETFs underway and the growing acceptance of Bitcoin by companies-the latest to join was Ferrari-there is a strong likelihood of seeing new price records by 2024.
NIKK/HSI UpdateBoth Nikkei and HSI hit overbought and rolled over much like FDAX.
Usually I'm bullish for Fridays, but not tomorrow. I don't think it'll tank though because the market already did today. Probably a gap down then whipsaw.
not expecting a gap up Monday, so probably gonna wait until then to go long on anything.
NIKKEI: Bull Flag broken upwards. Target 34,000Nikkei crossed over its late three month Channel Down pattern which according to the almost +30% rise that preceded it, may be the Bull Flag that technically follows and transitions into the next rally. The 1D technical outlook already turned bullish (RSI = 58.030, MACD = 173.400, ADX = 33.840) and as the 2021 fractal, targets the R1, or at least a little under it (TP = 34,000).
See how the 1D MA100 supported the downtrend on the August 17th bottom and shortly after a Bullish Cross on the 1D MACD followed.
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Nikkei Futures (NKD) Looking to Extend Higher as an ImpulseShort term Elliott Wave view in Nikkei Futures (NKD) suggests the Index rallies as a 5 waves impulse structure from August 18, 2023 low. Up from August 18, wave ((i)) ended at 32285 and pullback in wave ((ii)) ended at 31555 as the 1 hour chart below shows. Up from wave ((ii)), wave i ended at 31850 and dips in wave ii ended at 31620. Index resumed higher in wave (iii) towards 32375 and wave iv ended at 32150. Final leg wave v ended at 32560. This completed wave (i) in higher degree.
Pullback in wave (ii) ended at 32200 and the Index then resumed higher in wave (iii) towards 33280. Dips in wave (iv) ended at 33015 as expanded flat. Expect the Index to end wave (v) of ((iii)) soon. Afterwards, it should pullback in wave ((iv)) to correct cycle from August 25 low before the rally resumes. Typically wave ((iv)) should pullback somewhere around 23.6 – 38.2 Fibonacci retracement of wave ((iii)). Near term, as far as pivot at 31549 low stays intact, expect wave ((iv)) pullback to find support in 3, 7, 11 swing for more upside in wave ((v)).
Nikkei ( $NKD_F ) Should Find Extreme In Wave 4 Pullback SoonThe Short term view in Nikkei futures ticket symbol: $NKD_F suggests that the index is doing a bigger pullback in wave (4) to correct the cycle from the 03 January 2023 low. The index is expected to find the extreme in the pullback soon. Before it can start the next leg higher or it does a 3-wave reaction higher at least. So far the pullback from the peak is unfolding as Elliott wave zigzag correction where wave A ended at 31800 low. Up from there, wave B bounce unfolded in a lesser degree flat correction with wave ((a)) completed at 33260 high. Wave ((b)) ended at 32030 low and then wave ((c)) ended in a lesser degree 5 waves at 33502 high thus completing wave B.
Down from there, the index made a new low below the previous wave A low. And confirmed the next extension in the C leg lower. Whereas the wave ((i)) ended at 31690 low in a lesser degree 5 waves impulse sequence. Above from there, the index is doing a bounce in wave ((ii)) in a lesser degree zigzag structure. Where small wave (a) ended at 32310. Wave (b) ended at 31820 and wave (c) should end between 32455- 32849 100%-161.8% Fibonacci extension area of (a)-(b). From there, the index is expected to resume the decline for a push towards 31274- 30748 bigger extreme area before it could resume higher again or ends up doing a 3-wave bounce minimum. Near-term, as far as bounces fail below 33502 high expect index to extend in C leg lower.
Learn this price action setup for the BIGGEST DAY TRADESI walk through the pre-market prep and the price action that led to a big move on the Nikkei Index.
Learning price action means understanding 'WHO' may be trapped and where they will start to feel the pain and be forced to act and potentially close positions....that is when we want to initial a position to take advantage of the move.
The Nikkei index was a great example of knowing when and where to trade which could have led to a big payouts.
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