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FxWirePro: Sell Nikkei 225 1:3 risk reward ratio

The Japanese benchmark stock index Nikkei225 reached several of our bull side targets like the ‘another 12 percent rise call in October 2017’; here is the link, http://www.fxwirepro.com/fxwire/popup/newsPopup?id=748952 however, our calculations suggest that the tide might finally be changing direction. The global stock market selloff that rattled investors’ nerves just a few weeks back exposed how years of complacency (since 2012 in case of Nikkei) could lead to violent stock market moves within days or weeks.

We believe that the selloff might not be over and Nikkei could go a long way down.

Why are we becoming bearish in stocks?

Our readers surely have this question in their mind, especially when the Bank of Japan (BoJ) has signaled continued monetary expansion and the Japanese economy is faring pretty well. The reasons are simple enough,

  • The rates are moving higher, especially in the United States. A weaker dollar is likely to add to it. A higher risk-free rate in treasuries means higher cost of capital for stocks and higher discounting rate for equity analysts.
  • The recent reports published by the U.S. Commerce Department with regard to Aluminum and Steel imports show just how serious the Trump administration is in curbing the trade deficit of the United States. Check out the reports at Commerce.gov
  • In addition to that, it is quite clear that the course of monetary policy has changed with more and more central banks signaling a shift.

Trade idea:

Our calculations suggest the Nikkei, which is currently trading at 21828 (JPN225) is likely to decline to as low as 15300 area. We recommend a stop loss near 24200.

  • Market Data
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