Nomura Shares May Drop as RSI Reaches Record: Technical Analysis

Shares of Nomura Holdings Inc., Japan’s biggest brokerage, may retreat after a 13-day rally that drove an indicator of overheating to a record, according to Sanford C. Bernstein & Co.

Nomura’s 14-day relative strength index increased to 93.6 at the close of trading on Jan. 4, the highest level since October 1974, when Bloomberg started tracking the data. The RSI measures the speed of share-price movements, with a reading above 70 indicating to some analysts that shares are overbought.

“A short-term pullback is likely,” Ayush Nagaraj, a Hong Kong-based sales trader at Sanford C. Bernstein, said on Jan. 4. “On the positive side, weekly volumes over the last two weeks have been high, indicating the uptrend could continue for the mid- to long-term.”

Optimism a market rebound will boost brokerage earnings helped Nomura shares more than double in 2012, gaining 54 percent in a 13-day winning streak through the end of last week that was the longest rally in at least 38 years. The benchmark Nikkei 225 Stock Average gained 23 percent last year, the most since 2005. Shares have rallied on expectation Japan’s Liberal Democratic Party, which returned to power last month, will revive growth through more fiscal and monetary stimulus.

An average of 101 million Nomura shares changed hands each day in the two weeks through Dec. 28, according to data compiled by Bloomberg. The daily average in 2012 was 39 million shares, the data shows.

“When the market is in an uptrend, volume tends to increase as well,” said Makoto Kikuchi, chief executive officer at Myojo Asset Management Japan Co., a Tokyo-based hedge fund advisory firm. “People think the brokerages should benefit.”

Technical analysts look at price charts to forecast resistance and support levels that might restrict further price increases or limit declines.

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