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  1. #1
    Specialist Member RCox's Avatar

    Massive Nikkei Drops Create Contrarian CALL Plays !!!

    Massive Nikkei Drops Create Contrarian CALL Plays

    Last week we saw some of the biggest drops in the Nikkei since the earthquake/tsunami event led to immense and prolonged destruction in the country. In a single session last week, the index dropped by more than 7%, and again this week we have seen declines of 3.7% in a single session. These are the types of moves I like to see because it means that markets are becoming irrational and fueled by little more than momentum.

    Contrarian positions in these cases also carry added risk, but the benefit is that markets are offering better prices from a short term perspective. Here, I am looking for prices to move into the 38.2% retracement of the move from around 8550, which comes in at 13,200. This is a long term move, so it should be visible for a large cross section of the market. Look for hourly or daily CALL options in the Nikkei 225 if prices move into this region.

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  2. #2
    Specialist Member runneroption's Avatar
    Thank you Richard for the coverage. I think it is too early to see 13200 on Nikkei. If the market remain bearish it could happen in two or three weeks, but not this week. If the Japanese market turn bullish again we could not see such levels, so probably closer call entry will be appropriate in such case, not sure for the moment but we will see how it will develop during the session

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    Last edited by runneroption; 05-27-2013 at 08:23 PM.

  3. #3
    Specialist Member RCox's Avatar
    Yes, it might very well be too early but given the volatility this index has shown, there is really no choice but to wait for technical support (on a long term basis) before getting back in. Remember, its better to be out of the market wishing you were in, than it is to be in the market wishing you were out.

  4. #4
    Legendry Member Michael Hodges's Avatar
    Quote Originally Posted by RCox View Post
    Massive Nikkei Drops Create Contrarian CALL Plays

    Last week we saw some of the biggest drops in the Nikkei since the earthquake/tsunami event led to immense and prolonged destruction in the country. In a single session last week, the index dropped by more than 7%, and again this week we have seen declines of 3.7% in a single session. These are the types of moves I like to see because it means that markets are becoming irrational and fueled by little more than momentum.

    Contrarian positions in these cases also carry added risk, but the benefit is that markets are offering better prices from a short term perspective. Here, I am looking for prices to move into the 38.2% retracement of the move from around 8550, which comes in at 13,200. This is a long term move, so it should be visible for a large cross section of the market. Look for hourly or daily CALL options in the Nikkei 225 if prices move into this region.

    Click image for larger version. 

Name:	#nkdm3daily.jpg 
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ID:	479
    Is that really a contrarian play? Isn't the Nikkei in rally mode? Isn't that position more of a trend following buy-on-the-dip type move? Enquiring minds want to know...

  5. #5
    Specialist Member LesterK's Avatar
    I think Nikkei trend is already hit by this event and won’t survive in the next weeks and months. So it could be a short lived retracement now if my logic, which I think Richard is also following, is right. If the trend is intact of course we will see new highs and this trade will also end in the money, independently of the wrong prediction. So two opposite predictions – same outcome, this is the best trade you could have.

  6. #6
    Specialist Member marvel's Avatar
    Nikkei is trading sideways this week and the Richard analysis is mostly right. We have already seen some partial rebound, but it is very weak and I am expecting further downside pressure to come soon.

  7. #7
    Legendry Member Michael Hodges's Avatar
    i've been looking at this trade some more and it looks like you guys are standing in the way of a big fat bear freight train.

  8. #8
    Veteran Member Dan21's Avatar
    Haha That’s really funny. If they are standing this way it could be very bad for their pockets, especially if they are too aggressive and persuaded in their analysis

  9. #9
    Veteran Member uj.forex's Avatar
    Nikkei gained today in the Asian session and almost covered its yesterday's drop.... however, the out look is bearish according to me, where it may fell down further in the later hours of trading today.... a clear indication from the side of monetary policy makers should come up to clear its direction, as the market is playing in a wide range for the past few trading days....

  10. #10
    Legendry Member Michael Hodges's Avatar
    Quote Originally Posted by uj.forex View Post
    Nikkei gained today in the Asian session and almost covered its yesterday's drop.... however, the out look is bearish according to me, where it may fell down further in the later hours of trading today.... a clear indication from the side of monetary policy makers should come up to clear its direction, as the market is playing in a wide range for the past few trading days....
    The Nikkei is adjusting to the new yen valuation. I am not surprised to find Japanese based traders scooping up all that free money. I don't know about a continued down trend but I would expect to see the yen trapped in a range...each time it gains in value someone will be waiting to shave some profits off the top....

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