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Bullish Chart Action in an Overlooked Japan ETF


Exchange traded fund tracking Japanese stocks have recently been solid performers with the iShares MSCI Japan ETF (EWJ) and the WisdomTree Japan Hedged Equity Fund (DXJ) posting an average gain of about 7.5% over the past three months.

The Maxis Nikkei 225 Index Fund (NKY) , the ETF proxy of Japan’s benchmark Nikkei 225, has been solid as well. NKY’s chart action indicates the ETF’s recent gains could turn into something more significant. NKY gives the only access to Japan’s Nikkei stock average other than those in Japan.

“NKY has formed a cup with handle pattern,” notes Deron Wagner of Morpheus Trading Group. “The weekly chart has been building momentum since breaking the downtrend line two months ago and reclaiming the 40-week MA. The 10-week MA is in a strong uptrend and has recently crossed above the 40-week MA (bullish crossover signal).”

NKY debuted three years ago. The ETF allocates 23.4% of its weight to Japanese industrial stocks and another 14% to the technology sector. NKY’s second-largest holding is SoftBank (SFTBY), giving the ETF some exposure to the widely anticipated Alibaba initial public offering. The Japanese Internet and telecom giant owns 37% of Alibaba, or 25% more than Yahoo’s (YHOO) stake. [An ETF With Some Alibaba Access]

As for NKY’s charts, Wagner adds “NKY is currently forming the handle portion of the pattern, which is four weeks in length. A test of the rising 10-week MA on a pullback over the next week or two would be an ideal entry point.”

NKY currently resides 3.3% below its 52-week high, but the ETF is about 3% above its 200-day moving average. Its 50-day moving average recently crossed above its 200-day line, which could be a bullish technical signal as well.

Maxis Nikkei 225 Index Fund


ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.