The Nikkei 225 Index jumped sharply this week, reaching its highest level since July 6, and 15% above its lowest level this month. This rebound was driven by the ongoing technology stock gains as investors bought the recent dip. It also happened as traders cheered the recent earnings.
Kioxia, Softbank, and Tokyo Electron rebound
The Nikkei 225 Index jumped this week as top technology companies like Softbank, Kioxia, and Tokyo Electron rebounded following the recent dip.
Kioxia, the biggest memory company in the country, rose to ¥53,830, up by 50% from its lowest level this month. This rebound mirrored other memory companies like Samsung, Micron, and SK Hynix.
Kioxia published strong financial results, with its revenue and profits soaring. In its guidance, the company said that it will make about $11.78 billion in operating profit in the current quarter. This is a remarkable comeback for a company that was on the verge of collapsing a few years ago.
SoftBank stock also jumped to ¥5,774, up sharply from this month’s low of ¥4,520, helped by the ongoing performance of its portfolio companies. Its stakes in OpenAI and Intel helped its profitability. Its net profit for the June quarter jumped to ¥347 billion, much higher than the expected ¥120 billion. Its stake in SoftBank jumped by ¥1.3 trillion.
SoftBank stock is also doing well today after a report showed that OpenAI’s revenue run rate jumped to $40 billion as the company prepares for its IPO. A $2 trillion valuation of Anthropic, will likely push its valuation into the trillion status.
Other top companies in the Nikkei Index, like Advantest and Tokyo Electron, have also rebounded in the past few days.
Most notably, top companies like Recruit Holdings, Fujikura, Terumo, IHI Corporation, Nintendo, and Olympus have soared by over 15% in the last five days.
Japanese yen retreat
The Nikkei 225 Index has also jumped amid the ongoing Japanese yen retreat. The USD/JPY exchange rate rose to 159.36, up sharply from this month’s low of 155.23.
This performance happened even after the United States and Japan intervened following its crash to its lowest level in decades. It is estimated that the two sides spent billions of dollars on these interventions.
The main reason behind the yen crash after the intervention is that forex interventions rarely work in the long term. Also, the pair has become a major beneficiary of the carry trade as the spread between the US and Japan interest rates is still wide.
Japan stocks react differently to the weakening yen. Large exporters benefit as the weak currency makes their products cheaper, and vice versa.
Nikkei 225 Index technical analysis
Nikkei 225 chart | Source: TradingView
The daily chart shows that the Nikkei 225 Index has rebounded from a low of 60,398 on July 29 to a high of 69,716, its highest level since June. It has formed a bullish flag pattern, a common continuation pattern.
The index has remained above all moving averages, a sign that bulls remain in control. Also, the Relative Strength Index (RSI) has moved above the neutral line of 50 and is going upwards.
Therefore, the index will likely continue rising as bulls target the year-to-date high of 72,870. A drop below the key support level of 65,000 will invalidate the bullish view.
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