Nikkei 225 forms a bearish flag ahead of MUFG, Mizuho, Mitsui earnings

By:
on May 14, 2024
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  • The Nikkei 225 index has formed a bearish flag chart pattern.
  • Companies like Sony, Softbank, and Subaru have published their earnings.
  • Top banks like Mitsubishi, Mizuho, and Mitsui will release on Wednesday.

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The Nikkei 225 index remained is stuck in a range as traders focus on the depreciating yen and the ongoing Japanese earnings season. The index was trading at ¥38,350 on Tuesday, where it has been stuck in the past few days. This price is almost 7% below its highest level this year.

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Japan bank earnings ahead

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The Nikkei 225 index has been in the spotlight as key Japanese companies release their earnings. Softbank, one of its biggest constituent published its financial results on Monday, reporting its first Vision Fund profits in years.

The other top Japanese companies that have published their earnings are giants like Bridgestone, Suzuki Motor, Subaru Corp, Yamaha, Rakuten, and Sony. Most of these firms released results that were better than estimates.

Wednesday will be a crucial day for the Nikkei 225 index as Japan’s biggest banks – Mitsubishi UFJ (MUFG), Sumitomo Mitsui (SMFG), and Mizuho Financial Group (MFG) – will publish their quarterly results. 

These results come at a time when these companies are doing well, helped by the BoJ decision to exit negative interest rates. Also, the results comes at a time when Japanese stocks are doing remarkably well, with the Nikkei 225 sitting near its highest level in decades.

Other Japanese banks that will publish their results this week are Concordia Financial, Rakuten Bank, Kyushu Financial Group, and Aozora Bank. 

The Nikkei 225 index is also stuck in a range ahead of key macro events. Japan will publish its GDP data on Thursday. Economists believe that the country’s economy contracted in Q1 as Japan moved to a recession.

This implies that the Bank of Japan will maintain a dovish tone since hiking could push the economy deeper into a recession. On the negative side, this means that the tumbling Japanese yen may continue its downtrend.

The other crucial catalyst for the stock will be the upcoming US inflation data scheduled for Tuesday. These numbers will provide more information about the US economy and signals of when the Fed will start cutting interest rates.

Nikkei 225 index forecast

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Nikkei 225

Nikkei 225 chart by TradingView

Turning to the daily chart, we see that the Nikkei index has remained in a tight range in the past few weeks. It was trading at ¥38,350, much lower than the year-to-date high of ¥41,068. It has also formed a bearish flag pattern, which is often a bearish sign. 

The index has also moved slightly below the 50-day Exponential Moving Average (EMA) while the Relative Strength Index (RSI) has moved below the neutral point. Therefore, the outlook for the index is bearish, with the next point to watch being at ¥37,000.

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