Email of the day on recent trades
Comment of the Day

October 13 2017

Commentary by Eoin Treacy

Email of the day on recent trades

I bought the Nikkei as it broke out of its range and it has been doing well on the back of an Abe victory which would lead to increased monetary spending and a lower yen, thus boosting the Nikkei.

I have read that very frequently pre-Japanese elections, the market runs up as people look to buy shares in industries that have been targeted by politicians for help, but that on the day of the election the market usually corrects. A buy the rumour, sell the news scenario. I wondered your thoughts on this. I know you are long the Nikkei and wondered if this was a potential long-term or short- term position, or what the charts are saying?

Also bought the US Tech 100 which broke out of its range but has been travelling sideways since it broke out and I wondered if that was not a good sign, since you usually talk about explosions waiting to happen either up or down. Best regards,


Eoin Treacy's view

Thanks you this email and congratulations on grasping opportunities. 

The Japanese election is on October 22nd, the Yen is testing its progression of higher reaction lows since early this year and both the BoJ and state pension funds are active buyers so there are some short-term headwinds and medium-term tailwinds. The Nikkei-225 has been ranging mostly below 20,000 for decades and is now above 21,000 so it is an opportune time to ask what next?

A very short-term overbought condition is evident so there is scope for some consolidation in the current area. If the Index can sustain the move above 20,000 we can conclude it is back in a medium-term demand dominated environment. Personally, I am willing to hold on because I believe there is scope for additional upside but also because my entry price was below 20,000. 

I bought the Russell 2000 as it was breaking upwards and I have also been somewhat disappointed at the slow pace of the breakout. As mentioned in successive audios, sentiment is really quite bearish so there is some reticence about buying which may be acting as a headwind. I do not have as much margin for error with this position and closed it today which on aggregate means I am reducing exposure after what has been a positive period for my positions. 


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