Nikkei jumps 31% in 3 months on weaker Yen & the uptrend remains intact

Thanks to the rapid and deliberate devaluation of the yen, the Nikkei has risen by 31.9% in just over 3 months, and the Japanese stock index remains in a steep uptrend.

247Bull.com first drew attention to the possible decline of the yen back in March 2012 and followed up with a series of articles exploring ways in which traders and investors could capitalize on the weaker currency. (See most recent article here.)

As the chart below shows, the Nikkei has been one of the primary beneficiaries of a weaker yen, and the Tokyo index remains in the steep uptrend channel that it began to form in late November.

A 12 month daily chart of the Nikkei stock index (Click on the chart for a larger version)

A 12 month daily chart of the Nikkei stock index (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

The outlook for the Japanese stock market continues to look bullish. Short-term traders who are long the Nikkei should stay long all the time the price remains in the green uptrend channel, while a violation of the lower trend line would likely be a good time to take profit.

Last weekend Japan’s economy minister, Akira Amari, commented that, “It will be important to show our mettle to see the Nikkei reaches 13,000 by the end of the fiscal year”, and Japan’s fiscal year ends 31 March 2013. His goal then, is to boost the Nikkei by around 15% in a little over six weeks.

Investors with a longer-term perspective should consider riding out intermediate-term corrections since the outlook for company earnings continues to improve. As Kazuhiro Miyake, Chief Strategist at Daiwa Securities pointed out recently, an average yen/dollar exchange rate of 95 during 2013 would produce near-record earnings per share for Japanese companies.

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