Another Reason to Buy Japan
- Posted by Greg Harmon
- on September 27th, 2013
Japanese stocks have been hot with the birth of Abe-nomics. And in a reinforcing feedback loop they may be ready to make their own Great Leap Forward. The chart for the Japan iShares, $EWJ, has been building a bearish Butterfly Harmonic and just breaking the B level higher. The Potential Reversal Zone (PRZ) at 12.90 is still a good long way above. And from a more traditional Technical Analysis perspective price is juts about to break resistance from May to the upside.
These are both positives for the Japanese market in their own right. But a little thing known as the carry trade is about to kick in and give the market yet another boost. The chart of the Australian Dollar against the Yen shows the important role it has played for the Japanese market to date. In the carry trade, traders shorting the Yen because it is cheap to borrow and then invest in the Australian Dollar because it has a high interest rate. This leads to a cheapening of the Yen both against the Australian Dollar and absolutely. It is the latter that interests us here. Weakening the Yen is a positive for Japanese
stocks. Take another look at that chart of the Japan iShares since July 2012 and notice the correlation between that market and the currency pair. The chart below shows that the pair played out a bearish Deep Crab Harmonic and retraced 50% of the move, but is now heading back higher. The Australian Dollar is strengthening and the Yen weakening. Buy Japan.
Dragonfly Capital Views Anniversary Celebration Sale Ends this Week
For a limited time the Opportunity to join the Dragonfly Capital Views Premium Membership on an Annual basis is available for only $600.
This is 20% off of the standard annual subscription price and nearly 45% off of a rolling monthly membership! Don’t miss this limited opportunity to join or upgrade! Sign up here.
Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through September 2013 Expiry and sign up here
If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
Dragonfly Capital Updates
- SPY Trends and Influencers March 8, 2014
- Cleveland’s Best Linkfest!
- Macro Week in Review/Preview March 7, 2014
- Top Down Options Trading, Risk Management, and Collars
- Time to Sell Corn?
- Long Term Pick of the Week: Bridges, Iron and Voodoo
- Premium Earnings 3-6-14
- Your Second Chance in Natural Gas Is Here
- The Third Pitch From OpenTable
- Premium Earnings 3-5-14