(Bloomberg) -- Japan’s Nikkei 225 Stock Average has formed a “double top” in a chart, signaling the end of a four- month rally, according to Nomura Holdings Inc.
A double-top formation, a chart pattern some technical analysts read as a sign to sell, appears when prices fall before overtaking a previous high. The Nikkei rose to as much as 10,086.18 on July 1, short of an eight-month high on June 12. Since then, the gauge declined for seven days and dropped beneath a low of 9,511.45 on June 23, completing the formation.
“We don’t see a double top as clearly as this very often, and that confirms the end of the four-month rally,” said Shoichiro Yamauchi, a technical analyst at Nomura. “How deep and long a correction will be depends on whether the Nikkei falls below its 75-day average.”The Nikkei, which has climbed 44 percent from a more than 26-year low on March 10 through June 12, dropped 1.4 percent to 9,291.06 yesterday, approaching a 75-day average of 9,251.99.
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