Bloomberg News

‘Mini Golden Cross’ Signals Nikkei 225 Rally: Technical Analysis

October 14, 2011

Oct. 14 (Bloomberg) -- Japanese stocks may be set for a rally after the benchmark Nikkei 225 Stock Average yesterday formed a so-called “mini golden cross,” according to Nomura Holdings Inc.

The five-day moving average on the Nikkei 225 yesterday rose above the 25-day moving average, forming a small “golden cross” for the first time in about four months. The formation is a bullish signal according to Shoichiro Yamauchi, a technical analyst at Nomura, Japan’s biggest brokerage.

“This is the first mini golden cross we’ve seen in a while,” Yamauchi said. “Analysis of the chart suggests that the downward trend in stocks is probably over and in the short- term there’s a good chance the market will rise.”

The Nikkei slipped 0.7 percent to 8,764.35 as of 13:36 p.m. today. The gauge rebounded 5.3 percent in the previous six trading days amid signs that Europe will take steps to contain its debt crisis. Japan’s benchmark stock index had tumbled as much as 17 percent from a recent high on July 8 amid concern the U.S. would fall into another recession and as Europe crisis threatened to spill over into the banking system.

The last time the Nikkei formed a mini golden cross, on June 24, it heralded a 4.7 percent gain in the gauge through July 8.

--With assistance from Masaaki Iwamoto in Tokyo. Editors: Jason Clenfield, Jim Powell.

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To contact the reporters on this story: Satoshi Kawano in Tokyo at skawano1@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.


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