Rising business investment and retail sales are bullish for Nikkei. Will Nikkei continue the climb?
Economic data from Japan after a negative first quarter GDP report have been mostly positive. Industrial production growth accelerated to 2.6% over year in April from 2.5% in March, and retail sales rose 1.6% over year from 1% in March. Machinery orders, which are a proxy for business capital investment, also rose – to 9.6% over year in April after 2.4% contraction in March. With Bank of Japan expected to keep its monetary stimulus program intact Friday, rising business investment and retail sales are bullish for Nikkei.
On the daily chart the Nikkei: D1 has been rising after hitting nine-month low in the end of March. The price above the 50-day moving average MA(50) is rising too.
The Donchian channel is neutral: it is flat.
The Parabolic indicator has formed a buy signal.
The MACD indicator is above the signal line and the gap is narrowing, which is bearish.
The stochastic oscillator is falling but has not reached the oversold zone.
We believe the bullish momentum will continue after the price closes above the upper boundary of Donchian channel at 22999.70. This level can be used as an entry point for placing a pending order to buy. The stop loss can be placed below the last fractal low at 21919.40. After placing the order, the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the break even point. If the price meets the stop loss level (21919.40) without reaching the order (22999.70), we recommend cancelling the order: the market has undergone internal changes which were not taken into account.
Technical Analysis Summary
Position Buy
Buy stop Above 22999.70
Stop loss Below 21919.40