Japan 225 IndexShort
JP225 swing trade
I entered a short position on the Nikkei225 index.
These are the key economic factors and how they impact this trade idea, be it positively or negatively I will give each factor a rating, if the rating is 0, then this factor does not help our position, if it is 1 and above it supports our trade.
Economy
1. Inflation(CPI) We have seen a cooldown in inflation to 2.5% which is decent inflation that supports stocks, therefore it supports indexes. For this trade, it is a negative factor, because we want to short the Nikkei. So this factor gets a 0/1
2. Interest rates The latest hike in interest rates is a negative factor for the Nikkei, this year the BOJ is expected to hike rates more, therefore not helping the index. I'm giving this a rating of 1/1
3. GDP The past 6 GDP filings have been bad for Japan(except for the one in March we got 0.1%) so it is good for our trade idea, I'm giving it a 1/1
4. PMI Both the Services and Manufacturing PMIs show an expansion in Japan's economy, therefore being bad for my position. I'm giving this a 0/2(there are 2 possible points because I count Manufacturing and Services as two separate factors).
5. Retail sales have shown us a decrease starting from April 2023 when we were at 7.20%. Now we are at 2.4% with the latest release beating the forecast significantly, therefore it gets a 1/2
6. Unemployment recently has shown an increase, starting from Jan. 2024 when we were at 2.4%, to now at 2.6%. Overall we have a steady, range-bound unemployment, in the range of: 2.5%<->2.7%. I'm giving this a 1/2 rating because unemployment has increased, but not drastically.
Sentiment
1. Seasonality. Over 10 years the expected result of this month is -1.4% and next month is expected to be -0.8%. The five-year average suggests an even bigger downward momentum. It is expected by both the 5-year and 10-year averages to see a downward move for the rest of the year with a few slightly positive months. Therefore I'm giving this a 2/2
2. Retail positioning shows us that 64% of people are positioned long, we need to take this as an opposite signal because statistically, the masses of people are wrong. Therefore it gets a 1/1
3. COT the latest filing shows us that there was a -7.81% net change in positions, which indicates that large institutions may be starting to sell, the actual long/short contracts show us that only 30.7% of institutions are short, but this is a metric that needs time to change. Also, we see a level at which short positions start to increase and long positions decrease. Therefore I'm giving this a 3/4
Technical
I entered based on an "active zone" I took the entry as shown on the chart, if the index falls rapidly I will add another position, but we have to wait for that. The entry is good so it gets a 1/1
Summary
Trade expected RR: 3
Total points 11/17
64% analytical expectancy. This is good as most of my positions are often 50% to 60%
These are the key economic factors and how they impact this trade idea, be it positively or negatively I will give each factor a rating, if the rating is 0, then this factor does not help our position, if it is 1 and above it supports our trade.
Economy
1. Inflation(CPI) We have seen a cooldown in inflation to 2.5% which is decent inflation that supports stocks, therefore it supports indexes. For this trade, it is a negative factor, because we want to short the Nikkei. So this factor gets a 0/1
2. Interest rates The latest hike in interest rates is a negative factor for the Nikkei, this year the BOJ is expected to hike rates more, therefore not helping the index. I'm giving this a rating of 1/1
3. GDP The past 6 GDP filings have been bad for Japan(except for the one in March we got 0.1%) so it is good for our trade idea, I'm giving it a 1/1
4. PMI Both the Services and Manufacturing PMIs show an expansion in Japan's economy, therefore being bad for my position. I'm giving this a 0/2(there are 2 possible points because I count Manufacturing and Services as two separate factors).
5. Retail sales have shown us a decrease starting from April 2023 when we were at 7.20%. Now we are at 2.4% with the latest release beating the forecast significantly, therefore it gets a 1/2
6. Unemployment recently has shown an increase, starting from Jan. 2024 when we were at 2.4%, to now at 2.6%. Overall we have a steady, range-bound unemployment, in the range of: 2.5%<->2.7%. I'm giving this a 1/2 rating because unemployment has increased, but not drastically.
Sentiment
1. Seasonality. Over 10 years the expected result of this month is -1.4% and next month is expected to be -0.8%. The five-year average suggests an even bigger downward momentum. It is expected by both the 5-year and 10-year averages to see a downward move for the rest of the year with a few slightly positive months. Therefore I'm giving this a 2/2
2. Retail positioning shows us that 64% of people are positioned long, we need to take this as an opposite signal because statistically, the masses of people are wrong. Therefore it gets a 1/1
3. COT the latest filing shows us that there was a -7.81% net change in positions, which indicates that large institutions may be starting to sell, the actual long/short contracts show us that only 30.7% of institutions are short, but this is a metric that needs time to change. Also, we see a level at which short positions start to increase and long positions decrease. Therefore I'm giving this a 3/4
Technical
I entered based on an "active zone" I took the entry as shown on the chart, if the index falls rapidly I will add another position, but we have to wait for that. The entry is good so it gets a 1/1
Summary
Trade expected RR: 3
Total points 11/17
64% analytical expectancy. This is good as most of my positions are often 50% to 60%
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.