Here’s why the Nikkei 225 Index is in a bull run and why it may hit ¥69k soon

Japanese stocks went parabolic on Thursday, helped by the soaring Softbank stock price and the rising possibility of a deal between the United States and Iran. The Nikkei 225 Index jumped to ¥62,836, bringing the year-to-date gains to 16.67%.

Why Japan stocks are pumping today 

The Nikkei 225 Index and Topix are in a strong bull run today, after reopening following the recent Golden week closure.

Most of thee gains are because of the rising possibility of a deal between the United States and Iran. 

According to Axios, there is a rising possibility that the US and Iran will sign an agreement as soon as this week. This deal will include Iran reopening the Strait to Hormuz in exchange for sanctions relief.

In his response to the story, Trump confirmed that talks were making progress, while I still threatened intense bombing if it does not work.

Such a move would be bullish for Japan, a country that imports most of its energy needs. Indeed, crude oil and natural gas prices have pulled back in the past few days.

The Nikkei 225 Index is also soaring because of the ongoing global stock market surge that has pushed Americans stocks to a record high. Investors have largely embraced a risk-on sentiment as hopes that the worst is behind us rise.

At the same time, the index is soaring because of the ongoing AI boom that has pushed equities to record highs. A good example of this is Softbank, whose stock jumped by 18% on Thursday. 

Softbank has become a major player in the AI industry after investing billions of dollars. It is part of the Stargate project, which plans to invest over $500 billion in data centers. It has also invested heavily in OpenAI.

Additionally, the performance of the Japanese yen has contributed to the Nikkei surge this year. The currency plunged to 160 against the dollar last week, leading to a $35 billion intervention by the Bank of Japan. A weaker currency boosts the index by promoting exports. It also boosts earnings of companies with foreign operations, which repatriate their cash to Japan.

Top movers in Japan this year 

Most Nikkei 225 Index constituents have done well this year, with Furukawa Electric jumping by 333% and Mitsui Kinzoku jumping by 165%’

The other top gainers this year are companies like IBEDEN, Resonac, Fujikura, Taiyo Yuden, and Sumitomo Electric. All these stocks have jumped by over 100% this year.

On the other hand, the top laggards in the Nikkei 225 Index were companies like AEON, SHIFT, Nintendo, Subaru, Sumitomo Pharma, and Nomura Research Institute.

Nikkei 225 Index technical analysis 

Nikkei Index chart | Source: TradingView 

The daily timeframe chart shows that the Nikkei Index has soared this year and is now near its all-time high. This chart points to more gains in the near future as it formed a cup-and-handle pattern, which is a common continuation sign in technical analysis.

The Nikkei 225 Index has remained above the 50-day and 100-day Exponential Moving Averages (EMA) and the Supertrend indicator.

The distance between the cup’s upper side and its lower side is about ¥9,000. Adding this amount to the upper side of the cup gives the approximate target to nearly ¥69,000. 

On the other hand, a move below the key support at ¥58,000 will invalidate the bullish Nikkei 225 Index forecast and point to more downside.