Nikkei 225 Rally May Falter as Volume Wanes

Japanese stocks will have difficulty maintaining a rally that lifted the Nikkei 225 Stock Average to a two-month high unless volume increases, according to Mizuho Securities Co. technical analyst Yutaka Miura.

The Nikkei 225 advanced 6.4 percent in the last five days amid bullish signals including a so-called double-bottom pattern that formed on Nov. 19, when the benchmark rose above its 200-day moving average, Miura said. The gauge also broke out of a resistance range on an ichimoku chart, he said. Trading volume of Nikkei 225 shares hit an eight-month high on Nov. 16, when the gauge had its biggest advance of the rally. Volume has fallen 32 percent since.

“I think pressure is mounting a lot to sell,” said the analyst, who works for a unit of Mizuho Financial Group Inc., Japan’s third-largest lender. “The market will need enough energy to overcome that selloff. As technical charts turn positive, volume must increase for the Nikkei to maintain momentum and advance further.”

A double bottom is a chart pattern showing a drop in price, followed by a peak and then another drop to near the same level, again followed by a rebound, indicating support. Ichimoku analysis is used to predict an index’s direction through analyzing the midpoints of historical highs and lows.

The Nikkei 225’s rally, its biggest in a five-day period since March 2011, came after Prime Minister Yoshihiko Noda called for elections that polls show the opposition party will win. The opposition favors more monetary easing by the central bank and has proposed more stimulus spending.

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