Key points:
The Nikkei continued its upward trajectory on Friday, gaining close to 0.6% to reach 39,670.15 by midday. The broader Topix index also saw a modest rise of 0.2%, standing at 2,718.03.
See: Nikkei 225 chart shows a strong upward trend with the index closing at 39,635.15 on the VT Markets app.
The Nikkei 225 closed at 39,635.15, marking a weekly progression towards gains exceeding 2%, reflecting the resilience of the Japanese equity market amidst broader global economic uncertainties. The index’s ability to maintain its gains highlights its strength even as global markets grapple with inflation concerns and geopolitical tensions.
Technically, the price remains above the key 5, 10, and 30-period moving averages, indicating sustained bullish sentiment. The MACD remains in positive territory, with the line crossing above the signal line, confirming increasing buying pressure. This suggests that there is still potential for further gains as the market approaches the critical 39,943.15 resistance level.
Looking ahead, traders should monitor whether the index can break above this resistance, which would signal a continuation of the bullish trend. On the downside, support near 39,000 could come into play if the momentum weakens.
Fast Retailing provided the largest boost to the Nikkei. The stock climbed 3.8%, helping drive over half of the index’s 231.93-point gain.
Fast Retailing, the owner of the global fashion brand Uniqlo, announced record-breaking profits for the third consecutive year, owing to improved margins in its international operations. This earnings strength further fuelled confidence in Japan’s retail sector, which had been under pressure due to fluctuating consumer sentiment.
Meanwhile, semiconductor-related stocks demonstrated resilience despite a dip in the Philadelphia SE Semiconductor index the previous day. Shares of Nvidia rallied, and Japanese chip-related firms followed suit.
Chip-testing equipment maker Advantest, which counts Nvidia as a key client, rose 2.4%, while Tokyo Electron, a major player in chip-making equipment, saw a 0.6% increase.
However, the Nikkei’s advance appeared restrained by investor caution ahead of Monday’s public holiday and upcoming earnings reports. Some market participants seemed hesitant to push the index toward the 40,000-point level.
We anticipate the Nikkei to remain range-bound around its current level as investors adjust their positions ahead of the long weekend, with corporate earnings results expected to drive the next major market moves.
In case you missed, also read: Nikkei Retreats as U.S. Yields Rise
The semiconductor sector’s ongoing strength, combined with key retail earnings like Fast Retailing’s robust performance, suggests a cautiously optimistic outlook for the broader index. However, lingering concerns over underperforming sectors such as retail may keep the market in check.
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