1. Technical insight
Nomura Securities Co Ltd, Tokyo
Investment Strategy
Shoichiro Yamauchi +81-3-5255-1792 shoichiro.ya mauc hi@ nom ura.com
TOPIX Core 30 Index outlook and key points 15 December 2010
Japanese full report & English summary: 10 Dec
1. Assuming all goes well, we expect the TOPIX Core 30 Index to seek to regain its April Report no. S10-078
2010 high through spring 2011.
2. We expect stocks that have been in the doldrums for some considerable time to catch Nikkei Average (10 December)
up through 2011 Q1. Specifically, we focus on the three megabanks, Nintendo, Nippon
10,211.95
Steel, Toyota Motor, and Seven & i Holdings.
3. Some stocks that have been at the forefront of the rally to date have started to show
TOPIX (10 December)
signs of leveling off.
4. With the market likely to remain in a holding pattern for now, we think investors would 888.22
be best advised to continue avoiding defensive stocks. Please read the important
disclosures and analyst
• Index could work to regain April 2010 high by spring 2011: The TOPIX Core 30 certifications on pp. 69-72.gl
Index bottomed at its 2 November low of 435. Assuming all goes well, it could seek to
regain its 12 April 2010 high of 565 through spring 2011. With wave formation
suggesting that the index has moved into an upward phase corresponding to upward
wave 3, we think it could aim for 680, equivalent to a 38.2% retracement of the fall
between the February 2007 high of 1,140 and the March 2009 low of 395, over the
medium term.
• Focusing on catch-up by laggard stocks: We expect stocks that have been in the
doldrums for some considerable time to catch up through 2011 Q1. Specifically, we
regard the three megabanks Mitsubishi UFJ Financial Group [8306], Sumitomo
Mitsui Financial Group [8316], and Mizuho Financial Group [8411], Nintendo
[7974], Nippon Steel [5401], Toyota Motor [7203], and Seven & i Holdings [3382]
as promising candidates to outperform the TOPIX. Many of these stocks have fallen
through Oct–Nov, and have considerable return reversal potential from a chart
perspective.
• Some stocks at forefront of rally likely to level off over short term: Some stocks
that have been at the forefront of the rally to date have started to show signs of
leveling off, including some export-oriented companies such as Honda Motor [7267]
and Canon [7751], Mitsui & Co [8031], and Mitsubishi Estate [8802]. With some of
these stocks peaking out or already forming a dead cross in terms of TOPIX-relative
MACD (12–26 week), we expect a correction over the near term. We also expect star
stocks for 2010 such as Komatsu [6301] and Softbank [9984] to move into a holding
pattern once the rally runs its course.
• Best to stay away from defensive stocks: Although defensive stocks appear to
have broadly bottomed out, we think they will continue to underperform while they
remain in a holding pattern. We think investors would be well advised to continue
steering clear of stocks such as Tokyo Electric Power [9501], Kansai Electric
Power [9503], Takeda Pharmaceutical [4502], Astellas Pharma [4503], Nippon
Telegraph and Telephone [9432], and NTT Docomo [9437].
This report provides information that is derived from technical analysis and is intended as reference for investment
decisions. As such, parameters such as the basis for opinions and the assumed duration of investment differ from
those for the investment opinions by Nomura's fundamental analysts. Upside and downside targets for specific stocks
in this report are derived by technical analysis using ratios such as the golden ratio (0.618 : 0.382) and differ from the
target prices set by Nomura fundamental analysts based on earnings forecasts. Analysis in this report is based on
historical share price data and is no guarantee of future performance.
Nomura 1
2. Nomura Investment Strategy
Contents
1. TOPIX Core 30 Index outlook and key points...................................................... 3
Japan Tobacco [2914] (¥291,000)....................................................................................................6
Seven and i Holdings [3382] (¥2,091)...............................................................................................8
Shin-Etsu Chemical [4063] (¥4,190) ...............................................................................................10
Takeda Pharmaceutical [4502] (¥3,970).........................................................................................12
Astellas Pharma [4503] (¥3,050) ....................................................................................................14
Nippon Steel [5401] (¥288) .............................................................................................................16
Komatsu [6301] (¥2,496) ................................................................................................................18
Toshiba [6502] (¥437).....................................................................................................................20
Panasonic [6752] (¥1,190)..............................................................................................................22
Sony [6758] (¥3,040) ......................................................................................................................24
Nissan Motor [7201] (¥815) ............................................................................................................26
Toyota Motor [7203] (¥3,280) .........................................................................................................28
Honda Motor [7267] (¥3,135)..........................................................................................................30
Canon [7751] (¥4,085) ....................................................................................................................32
Nintendo [7974] (¥23,520 OSE)......................................................................................................34
Mitsui & Co [8031] (¥1,379) ............................................................................................................36
Mitsubishi Corp [8058] (¥2,179)......................................................................................................38
Mitsubishi UFJ Financial Group [8306] (¥402)................................................................................40
Sumitomo Mitsui Financial Group [8316] (¥2,620)..........................................................................42
Mizuho Financial Group [8411] (¥137)............................................................................................44
Tokio Marine Holdings [8766] (¥2,389)...........................................................................................46
Mitsubishi Estate [8802] (¥1,433) ...................................................................................................48
East Japan Railway [9020] (¥5,220) ...............................................................................................50
Nippon Telegraph and Telephone [9432] (¥3,815).........................................................................52
KDDI [9433] (¥487,000) ..................................................................................................................54
NTT Docomo [9437] (¥137,600) .....................................................................................................56
Tokyo Electric Power [9501] (¥1,984).............................................................................................58
Kansai Electric Power [9503] (¥2,050)............................................................................................60
Softbank [9984] (¥3,000) ................................................................................................................62
Sample ............................................................................................................................................64
Nomura Holdings [8604] is excluded from detailed analysis
2 Technical insight
3. Nomura Investment Strategy
1. TOPIX Core 30 Index outlook and key points
Index could work to The TOPIX Core 30 Index bottomed at its 2 November low of 435 (Exhibit 1). Assuming all goes
regain April 2010 high by well, it could seek to regain its 12 April 2010 high of 565 through spring 2011. With wave
spring 2011 formation suggesting that the index has moved into an upward phase corresponding to upward
wave 3, we think it could aim for 680, equivalent to a 38.2% retracement of the fall between the
February 2007 high of 1,140 and the March 2009 low of 395, over the medium term.
Focusing on catchup by We expect stocks that have been in the doldrums for some considerable time to catch up
laggard stocks through 2011 Q1. Specifically, we regard the three megabanks Mitsubishi UFJ Financial
Group [8306], Sumitomo Mitsui Financial Group [8316], and Mizuho Financial Group
[8411], Nintendo [7974], Nippon Steel [5401], Toyota Motor [7203], and Seven & i
Holdings [3382] as promising candidates to outperform the TOPIX. Many of these stocks fell
through Oct–Nov, and have considerable return reversal potential from a chart perspective.
Some stocks at forefront Some stocks that have been at the forefront of the rally to date have started to show signs of
of rally likely to level off leveling off, including some export-oriented companies such as Honda Motor [7267] and
over short term Canon [7751], Mitsui & Co [8031], and Mitsubishi Estate [8802]. With some of these stocks
peaking out or already forming a dead cross in terms of TOPIX-relative MACD (12–26 week), we
expect a correction over the near term. We also expect star stocks for 2010 such as Komatsu
[6301] and Softbank [9984] to move into a holding pattern once the rally runs its course.
Best to stay away from Although defensive stocks appear to have broadly bottomed out, we think they will continue to
defensive stocks underperform while the market remains in a holding pattern. We think investors would be well
advised to continue steering clear of stocks such as Tokyo Electric Power [9501], Kansai
Electric Power [9503], Takeda Pharmaceutical [4502], Astellas Pharma [4503], Nippon
Telegraph and Telephone [9432], and NTT Docomo [9437]. (Written on 10 December)
Technical insight 3
6. Nomura Investment Strategy
Japan Tobacco [2914] (¥291,000)
• The stock price had been declining since January 2010, but could now be on an uptrend since bottoming at
¥243,900 on 29 October.
• There has been an overall improvement in upturn signs on the chart. The TOPIX-relative MACD (12–26 week) has
bottomed and now looks likely to return to positive territory, while the TOPIX-relative stock price itself is now
pushing above the line of resistance that has held since January 2008. In the near term, we see the stock testing its
January 2010 high of ¥358,000.
• Once it has broken above this level, we would see it heading for ¥403,900, which represents a 38.2% retracement
of the decline from the December 2007 high of ¥708,000 to the March 2009 low of ¥216,000.
1. Weekly candlestick chart (intraday basis)
(¥ '000)
800 (5)
708 13-w k mov avg
Fibonacci retracement (3)
(07/12/21) 26-w k mov avg
700 100%
07/12/21→ 09/3/10 52-w k mov avg
604
(07/1/5)
(B)
600 76.4%
523
(08/8/29)
477 61.8%
500 Cumulative trading (06/4/21)
514
(07/3/7)
value for (1) 50.0%
370 (4) 366.0
400 different ranges 411
358.0 38.2%
(05/10/31) (08/11/5) (10/1/13)
(08/7/11)
362 23.6%
(06/6/15) (A)
300 (1) 314
236
(05/11/10)
Start of 183.8 (04/12/30) 250.1
240.8 243.9 0.0%
(04/4/28)
200
medium-term wave
2,000 206
(08/10/28) 216.0
(09/11/9) (10/10/29)
(09/3/10)
(05/2/14)
1,500 168
128.8 (C)
100
1,000 (04/7/27)
(03/4/7)
500 (2)
(yy/m/d)
0
03/1/10 03/9/12 04/5/14 05/1/14 05/9/16 06/5/19 07/1/19 07/9/21 08/5/23 09/1/23 09/9/25 10/5/28 11/1/28 11/9/30
300
250 Relative price vs TOPIX
200
150
100
50
(%)
100
80 RSI (25-day)
60
40
20
0
(%)
12
Weekly MACD (12, 26, 9)
8 (relativ e price basis)
4
0
-4
-8
('000 shs)
20
10
0
-10
Long margin bal (red bar), Net margin bal (blue line)
-20
Short margin bal (green bar, minus) (yy/m/d)
-30
03/1/10 03/9/12 04/5/14 05/1/14 05/9/16 06/5/19 07/1/19 07/9/21 08/5/23 09/1/23 09/9/25 10/5/28 11/1/28 11/9/30
Source: Nomura
6 Technical insight
8. Nomura Investment Strategy
Seven and i Holdings [3382] (¥2,091)
• The recent rise has taken the share price above the medium-term resistance line running through highs of January
2006 and April 2010. It now looks likely that it formed a double bottom at the lows of ¥1,831 in December 2009 and
¥1,848 in November 2010.
• The TOPIX-relative MACD (12–26 week) looks to have bottomed. Once the stock has consolidated its current level,
we would expect it to head towards the April 2010 high of ¥2,468.
• Once it has broken above this level, we would see it heading for ¥3,202, which represents a 38.2% retracement of
the decline from the January 2006 high of ¥5,420 to the December 2009 low of ¥1,831.
1. Weekly candlestick chart (intraday basis)
(¥)
6,000 Data before 25 Aug 2005 (B)
are connected with the prices
5,420
of Seven Eleven Japan
5,500 (06/1/4) Fibonacci retracement 100%
06/1/4→ 09/12/18
5,000 Cumulative trading
value for 13-w k mov avg
76.4%
4,500 different ranges 4,240
26-w k mov avg
4,020 (06/8/18)
4,010 4,000
(03/10/2) (04/4/13)
26-w k mov avg
(07/2/26) 61.8%
4,000
3,550
(08/8/5) 50.0%
3,500 3,510 3,120
(06/6/9) 3,390 (09/1/5) 38.2%
(06/11/21)
3,000 3,050
(03/11/19) 2,830 2,465 2,468
2,720 23.6%
(05/4/21) (09/5/20) (10/4/15)
2,500 (03/2/28)
2,000 (A)
Start of
2,000
1,500 2,050
(A)-(B)-(C)wave 1,994 0.0%
1,901
(99/11/30) (08/3/17) (08/10/27) 1,831 1,848
1,000 (09/3/10)
1,500 (09/12/18) (10/11/1)
500 (C)
(yy/m/d)
1,000
0
03/1/10 03/9/12 04/5/14 05/1/14 05/9/16 06/5/19 07/1/19 07/9/21 08/5/23 09/1/23 09/9/25 10/5/28 11/1/28 11/9/30
100
Relative price vs TOPIX
80
60
40
(%)
100
RSI (25-day)
80
60
40
20
0
(%)
12
9 Weekly MACD (12, 26, 9)
6 (relativ e price basis)
3
0
-3
-6
(mn shs)
6
Long margin bal (red bar), Net margin bal (blue line)
4 Short margin bal (green bar, minus)
2
0
(yy/m/d)
-2
03/1/10 03/9/12 04/5/14 05/1/14 05/9/16 06/5/19 07/1/19 07/9/21 08/5/23 09/1/23 09/9/25 10/5/28 11/1/28 11/9/30
Source: Nomura
8 Technical insight
9. Nomura Investment Strategy
2. Price data and major chart points 3. Daily candlestick chart
Closing 2010/12/8 2,091 Diff (%) P/E (forecast) (x) 18.5
price Prev mo-end 2,045 2.2 P/B (x) 1.09 (¥)
(¥) Prev yr-end 1,897 10.2 ROE (forecast) (%) 5.9 2,300
25-day mov avg
Mkt cap (¥bn) 1,854 Div yield (%) 2.67
YTD high 2,468 -15.3 β vs TOPIX (180-day) 0.83 75-day mov avg
2,160
(High→latest) (10/4/15) Oscillators Daily Weekly 2,200 200-day mov avg
(11/22)
2,117
YTD low 1,848 13.1 RSI (25) 68.8 46.6
(8/10)
(Low→latest) (10/11/1) Psych line (12) 41.7 41.7 2,064
Historical high 18,290 -88.6 Stoch-fast (13,9) 57.8 50.8 2,100
(10/7)
(High →latest) (99/11/30) Stoch-slow (3) 59.6 44.8
Key moving avgs Diff (%) Momentum Long margin (mn shs) 0.42 Ratio(x)
2,000
5-day 2,095 -0.2 up Short margin (mn shs) 0.68 0.62
25-day 2,030 3.0 up Fib retrace I II III
75-day 1,984 5.4 up High 100% 5,420 18,290
200-day 2,081 0.5 up 76.4% 4,573 14,406 1,900
1,909
↑ 1,891
5-wk 2,064 1.3 up 61.8% 4,049 12,003 (8/31)
150 (10/5)
13-wk 1,984 5.4 up 50.0% 3,626 10,061 1,848
1,800
100 (11/1)
26-wk 2,014 3.8 up ↓ 38.2% 3,202 8,118
52-wk 2,061 1.4 up 23.6% 2,678 5,715 50
12-mo 2,062 1.4 up Low 0.0% 1,831 1,831 (yy/m/d)
0
1,700
24-mo 2,116 -1.2 down Ichimoku chart pts Daily Weekly Monthly
10/7/1 10/8/13 10/9/28 10/11/11 10/12/27 11/2/10
60-mo 2,919 -28.4 down upper cloud 1,967 2,188 3,707
120-mo 3,393 -38.4 down lower cloud 1,926 2,150 2,885
Source: Nomura Source: Nomura
4. Monthly candlestick chart (logarithmic)
(¥) 18,290
20,000 Data before 25 Aug 2005
(99/11)
are connected with the prices
15,000 of Seven Eleven Japan
10,000 24-month mov avg (B)
7,000 60-month mov avg 5,420
120-month mov avg 4,750 (02/6)
5,420
II
(06/1)
5,000 (98/1) 4,020
3,537
(04/4) 3,550
(94/3)
4,000 2,732 3,770
(08/8)
3,835
3,000 2,392 (91/10) (98/10) (01/8)
I
(90/1) 2,830
2,618 2,720
6,000 (03/2) (05/4)
2,000 1,556 (95/4)
5,000 (86/7) 1,506 2,005 1,994
1,831
(88/2) (92/8) (A) (08/3)
4,000
1,500 (09/12)
1,394
3,000
1,000 1,088
(90/10) (C)
2,000 979
(88/11)
1,000 (87/11) (CY)
0
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Source: Nomura
5. Yearly candlestick chart (logarithmic) 6. Advances/declines (since Nov 1979)
No. of ups/downs (vs TOPIX) No. of hi/lo
(¥) 18,290 up down avg rtn up down avg rtn highs lows
(99/11)
Jan 14 17 -1.0 14 17 -1.8 8 10
20,000 Data before 25 Aug 2005 Feb 16 15 0.2 18 13 0.1 2 3
10,000 are connected with the prices 5,420 Mar 15 16 1.0 13 18 -0.7 1 1
of Seven Eleven Japan (06/1) Apr 18 13 4.1 15 16 1.9 2 3
5,000
May 20 11 0.6 17 14 0.5 2 0
2,000 2,720
Jun 16 15 0.1 17 14 0.2 1 1
1,831 Jul 19 12 1.5 17 14 1.7 1 1
1,000 (03/2)
(09/12) Aug 16 15 0.6 13 18 0.8 1 2
500 Sep 14 17 -0.2 14 17 1.4 0 1
Oct 16 15 0.2 16 15 1.3 3 4
200 Nov 21 11 5.6 23 9 5.6 4 5
Dec 20 12 3.4 17 15 1.9 7 1
100 Jan-Mar 16 15 0.6 15 16 -2.2 11 14
(CY) Apr-Jun 17 14 4.8 17 14 2.6 5 4
Jul-Sep 15 16 2.2 17 14 4.1 2 4
1970 1975 1980 1985 1990 1995 2000 2005 2010
Oct-Dec 22 9 8.4 20 11 8.1 14 10
Jan-Dec 17 14 22.3 17 14 15.4 32 32
Source: Nomura Source: Nomura
Technical insight 9
10. Nomura Investment Strategy
Shin-Etsu Chemical [4063] (¥4,190)
• We expect the stock to remain in a holding pattern for now, bounded on the upside by the line running through the July
2007 and April 2010 highs and on the downside by the line running through the December 2008 and August 2010 lows.
• Even if it breaks above this range, we would expect it to remain range-bound with the line through the June 2008
and April 2010 highs (dotted line in top graph of Exhibit 1) forming the upper limit.
• The TOPIX-relative MACD (12–26 week) is still negative. We see the stock as unlikely to enter an uptrend until it
breaks above the downward channel since September 2009 sometime in the future, and we think it will take
considerable time for it to recover to the April 2010 high of ¥5,720.
1. Weekly candlestick chart (intraday basis)
(¥)
11,000
(5)
10,000 9,580
Fibonacci retracement (07/7/13)
13-w k mov avg
100%
07/7/13→ 08/12/5 26-w k mov avg
9,000 52-w k mov avg
8,170
(06/10/26)
(B) 76.4%
8,000
7,040 7,000
Cumulative trading (06/1/13) (08/6/6) 1 61.8%
7,000
value for 6,880
6,010
(07/3/5) 5,720 50.0%
6,000 different ranges (09/9/24)
(10/4/5)
38.2%
4,980
4,780 5,380
(03/9/2)
5,000 (04/4/26) 4,340 (06/6/14) 23.6%
(05/3/3) 4,680
4,000 (08/3/17)
3,810
1,500 3,740
3,550
3,710 (A) 0.0%
3,390 (03/11/18) (05/4/21) 3,400 (10/8/25)
3,000 (03/4/14)
(04/8/16)
(08/12/5)
1,000 2
(4)
2,000 (C)
500
(yy/m/d)
1,0000
03/1/10 03/9/12 04/5/14 05/1/14 05/9/16 06/5/19 07/1/19 07/9/21 08/5/23 09/1/23 09/9/25 10/5/28 11/1/28 11/9/30
03/9/12 04/5/14 05/1/14 05/9/16
140
Relative price vs TOPIX
120
100
80
60
(%)
100
RSI (25-day)
80
60
40
20
0
(%)
8
Weekly MACD (12, 26, 9)
4 (relativ e price basis)
0
-4
-8
(mn shs)
6
Long margin bal (red bar), Net margin bal (blue line)
4 Short margin bal (green bar, minus)
2
0
(yy/m/d)
-2
03/1/10 03/9/12 04/5/14 05/1/14 05/9/16 06/5/19 07/1/19 07/9/21 08/5/23 09/1/23 09/9/25 10/5/28 11/1/28 11/9/30
Source: Nomura
10 Technical insight
12. Nomura Investment Strategy
Takeda Pharmaceutical [4502] (¥3,970)
• We expect little upside, but also see little risk on the downside. For now, we see the stock moving in a narrow range
between the May 2010 low of ¥3,690 and the March 2010 high of ¥4,300.
• The downtrend in the TOPIX-relative MACD (12–26 week) has steepened recently, making it more likely that it will
turn negative. We see the stock as unlikely to enter an uptrend until it breaks above the resistance line since August
2010 sometime in the future, and we think it will take considerable time for it to recover to the March 2010 high of
¥4,300.
1. Weekly candlestick chart (intraday basis)
(¥) (5)
9,000
8,430
Fibonacci retracement (07/6/6)
13-w k mov avg 100%
07/6/6→ 09/3/10
8,000 26-w k mov avg
52-w k mov avg
Cumulative trading 6,950
76.4%
7,000 value for (05/10/3)
(B)
different ranges 6,160
61.8%
(08/8/13)
6,000 6,170
5,420 (06/1/17) 50.0%
(04/11/12)
4,770 4,750 1 38.2%
5,000 (03/6/20) (09/1/5)
4,830 4,850 4,300
(05/1/21) (08/3/18) 3,960 (10/3/19) 23.6%
(09/5/20)
4,000 (A) 4,160
4000 3,750
3,850 (08/10/10)
3,750
(03/10/24) 3,690
(03/4/16) 3,500 (10/5/27) (10/10/27)
3000
3,000 (4) 3,130
(09/11/12)
2000 0.0%
(09/3/10)
1000
(C) (yy/m/d)
2,0000
03/1/10 03/9/12 04/5/14 05/1/14 05/9/16 06/5/19 07/1/19 07/9/21 08/5/23 09/1/23 09/9/25 10/5/28 11/1/28 11/9/30
110
100
Relative price vs TOPIX
90
80
70
60
50
(%)
100
80 RSI (25-day)
60
40
20
0
(%)
10
Weekly MACD (12, 26, 9)
5 (relativ e price basis)
0
-5
-10
(mn shs)
6
Long margin bal (red bar), Net margin bal (blue line)
4
Short margin bal (green bar, minus)
2
0
(yy/m/d)
-2
03/1/10 03/9/12 04/5/14 05/1/14 05/9/16 06/5/19 07/1/19 07/9/21 08/5/23 09/1/23 09/9/25 10/5/28 11/1/28 11/9/30
Source: Nomura
12 Technical insight