Score 8.1 (out of 10): Nikkei (Japan) could be impacted by macro data and rally +8% over next 1 month

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What’s Going On Here?

The ISM New Orders index tends to be a leading indicator for future economic growth. After a long period of expansion, it has just dropped below 50.0 – which indicates the start of a contraction. But is this always seen as negative for assets?

Why Now?

Nikkei (Japan) indicates an interesting buy set up for the next 1 month. During the previous 5 instances when the ISM Manufacturing New Orders fell below 50 for the first time in a year (as has just happened), Nikkei (Japan) rallied by +7.9% during the following 1 month, with a hit ratio of 80%. This buy signal received a high score of 8.1 (out of 10). This insight was generated with a closing price of 26,643.

What’s This Company About?

Nikkei (Japan) is in the Equity market index business. Based on the last 2 years’ risk/return profile, this asset is seen as Very Risky. Ticker symbol: N225.

What’s My Risk / Reward and Time Horizon?

We found 1 month to be the optimal trade horizon, after testing a number of possible alternatives (accuracy of previous returns). Otherwise consider closing out this trade once the target level of 28,749. (+7.9%) has been reached. Based on Nikkei (Japan)’s recent up and down swings, LongShortBets suggests considering to set a stop loss level for this insight at 25,958. (last price at 26,643), which is equivalent to a -2.6% decline.

Returns during similar periods:

The chart above shows the previous returns (in %) based on similar setups with the most recent ‘insight’ shown under (1), the second most recent ‘insight’ under (2), etc.

Previous episodes:

8.6% (2019-08-30), 2.6% (2015-12-31), 8.9% (2012-06-29), 7.9% (2009-06-30), -3.3% (2007-12-31)

Historical Chart:

Summary:

NameNikkei
ViewUp
Star (1 to 10)8.1
Target8.0%
Time1 month
Hit Rate80%

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