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Article / 02 July 2015 at 14:48 GMT

Japan's Softbank approaches technical crossroad

Technical Analyst / Saxo Bank
Denmark
  • Softbank starting to develop a descending triangle pattern in weekly charts
  • RSI sentiment bullish and could see stock to 10,000 on eventual break
  • Bearish run could take Japanese bank back to 5-5,500 area
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A Softbank worker tries to drum up business for a stock that could fly. Source: iStock

By Kim Cramer-Larsson

Earlier today our head of Asia macro strategy Kay Van Petersen had a look at Japan's Softbank from a tactical point of view in this video for our Essential Trades Q3 publication

But how does the Softbank stock look from a technical point of view?

Looking at a daily chart it jut looks like it is whipsawing a lot. It may be forming what could look like a symmetrical triangle but it is not of very good quality. 

Despite that, it is still worth to keeping an eye on the two trend lines for medium- to long-term trends.

Softbank daily
Whipsawing Softbank might be tentatively forming a symmetrical triangle. Source: Saxo Bank

Descending triangles

Looking at a weekly chart we can more clearly see a descending triangle pattern. RSI is in bullish sentiment and there is no divergence on the peak in 2013. 

The first warning of the break-out direction could be seen on the RSI with a break of the falling trendline or of the 40 threshold. If it does indeed break out bullish, expect to see new highs in the 10,000 region. 

A bearish break out  will most likely see Softbank down to the 5,000-5,500 level before there is some support. 

However, some patience is needed as I do not expect a break out before later in Q3. It is a pattern formed over 1½ years and a breakout is usually around 2/3 of the way to the apex but it could easily go 80% of the way before we see a break out. 

The later the breakout, the more powerful it is. 

Softbank weekly
A descending triangle pattern may offer a bullish run to 10,000, eventually. Source: Saxo Bank

— Edited by Martin O'Rourke

Kim Cramer-Larsson is a technical analyst at Saxo Bank


4y
Kay Van-Petersen Kay Van-Petersen
Great charts Kim!

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