Nikkei 225 slips below 41,000 as tech pressure and earnings uncertainty weigh on momentum
The Nikkei 225 declined 1.1% to close at 40,998 on Monday, as Japanese equities came under renewed pressure ahead of a pivotal earnings week. A sharp reversal from the recent 42,000 peak reinforced near-term caution, with weakness concentrated in the technology and industrial sectors. Stocks like Advantest, Tokyo Electron, and Keyence fell between 2% and 9%, reflecting investor jitters over chip demand and capital spending visibility.
Highlights
- Nikkei 225 closed at 40,998, down 1.1%, as tech and industrials led market pullback
- RSI dropped to 60, with index testing near 20-day EMA support around 40,174
- Earnings from chipmakers and U.S.-Japan trade developments weigh on risk sentiment
Technically, the Nikkei 225 continues to trade within an established ascending channel but is now showing signs of exhaustion near the upper boundary. Monday’s close came in just above the 20-day EMA at 40,174, a level that may serve as short-term support. A decisive drop below this zone could expose the 39,200 to 39,400 region, where both the 50-day and 100-day EMAs currently converge.
Nikkei 225 index dynamics (Source: TradingView)
The RSI has pulled back to around 60, signaling reduced bullish momentum, though not yet indicating full reversal. Candlestick patterns suggest a potential bearish engulfing formation at the channel top, heightening the probability of further consolidation. The rising trendline drawn from May remains intact for now, but a close below 40,000 could mark a structural breach and alter the bullish outlook.
Earnings and trade policy temper sentiment
Investors are growing cautious as several top-tier earnings reports loom. Companies such as Advantest and Tokyo Electron are under scrutiny after early-week losses, with expectations of weaker forward guidance amid global semiconductor softness. Broader macro themes are also in focus, including implications of the new U.S.-Japan trade accord and resumption of U.S.-China talks, both of which could affect Japan’s export-heavy industries.
Traders appear unwilling to chase highs until greater clarity emerges from the earnings cycle. The 42,000–42,300 resistance range remains a critical test for bullish continuation, while a drop through 40,100 would shift focus to downside targets near 39,200.
In our July 25 coverage, we noted that Nikkei’s repeated failures near 42,000 coupled with divergence in RSI signaled a possible retreat. That scenario is now playing out as index momentum stalls under headline risk and earnings volatility.
Latest Nikkei 225 News
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