A Down In the Rice Paddies Look at the Japanese Market

• Posted by Greg Harmon
• on November 19th, 2013

The Japanese stock market has been poised for a big move since early this summer. The tool of choice to trade this here, Japan MSCI iShares, $EWJ, has been building a tight coil since then and may be ready to pop. But just what will it take? Take a look at the chart.

The ETF has been building a rising wedge since June. The bottom bound has coincided with the 150 day Simple Moving Average (SMA), and the top is nearly flat, but with very slightly higher highs on each touch. There is a last stab at resistance if it were to move over the wedge at the may highs and then lots of room to move higher. It is setting up well to break higher but there are some things to watch for to confirm it. First the Bollinger bands which have been moving sideways need to shift to pointing higher. The RSI and MACD need to continue to move higher as well. They both currently support a break out higher but reversing lower could signal it is not ready yet. The volume is building and if it continues that could also be a sign of the breakout. The most troublesome indication is that the last two candlesticks have bee dojis, signalling indecision, at the wedge resistance line. A move lower would signal the indecision resolving to the downside, a break of the wedge, resolution to the upside. If the latter occurs wait for further confirmation of a new high over the May 22 high, to get involved.

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