Technical insight                                                                                                        N...
Nomura Investment Strategy           Contents           1. TOPIX Core 30 Index outlook and key points........................
Nomura Investment Strategy                          1. TOPIX Core 30 Index outlook and key pointsIndex could work to      ...
Nomura Investment Strategy1. TOPIX Core 30 Index (weekly, intraday basis)    (pts)    1,300                               ...
Nomura Investment Strategy2. Share price performance for TOPIX Core 30 Index stocks                                       ...
Nomura Investment StrategyJapan Tobacco [2914] (¥291,000)•        The stock price had been declining since January 2010, b...
Nomura Investment Strategy2. Price data and major chart points                                                            ...
Nomura Investment StrategySeven and i Holdings [3382] (¥2,091)•      The recent rise has taken the share price above the m...
Nomura Investment Strategy2. Price data and major chart points                                                            ...
Nomura Investment StrategyShin-Etsu Chemical [4063] (¥4,190)•      We expect the stock to remain in a holding pattern for ...
Nomura Investment Strategy2. Price data and major chart points                                                            ...
Nomura Investment StrategyTakeda Pharmaceutical [4502] (¥3,970)•      We expect little upside, but also see little risk on...
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  1. 1. Technical insight Nomura Securities Co Ltd, Tokyo Investment StrategyShoichiro 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 Nomuras 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. 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 analysis2 Technical insight
  3. 3. Nomura Investment Strategy 1. TOPIX Core 30 Index outlook and key pointsIndex could work to The TOPIX Core 30 Index bottomed at its 2 November low of 435 (Exhibit 1). Assuming all goesregain April 2010 high by well, it could seek to regain its 12 April 2010 high of 565 through spring 2011. With wavespring 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 uplaggard 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 ofof rally likely to level off leveling off, including some export-oriented companies such as Honda Motor [7267] andover 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 todefensive 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
  4. 4. Nomura Investment Strategy1. TOPIX Core 30 Index (weekly, intraday basis) (pts) 1,300 (B) 13-w k mov avg 1,200 1,140.94 1,136.53 26w k mov avg Fibonacci retracement 1,091.12 (07/2/27) (07/6/18) 100% 07/2/27→09/3/12 52w k mov avg 1,100 (06/4/21) 1,037.80 (07/10/11) Rise since Marc h 2009 is 1,000 essentially a three-leg uptrend 928.35 (08/6/6) (w aves 1-2-3-4-5). 76.4% 900 905.42 787.28 880.94 (07/8/17) Closing price 61.8% (06/6/14) 800 763.76 (04/4/26) 738.97 8 Dec (03/9/1 7) (05/3/9) 486.64 50.0% 700 3 705.04 1 38.2% 677.65 675.81 (08/3/17) (04/10/26) 561.11 565.12 600 63 9.78 (05/4/21) (10/4/12) (03/11/19) (09/8/10) 23.6% 500 510.10 (03/4/14) 441.09 457.06 435.84 400 (09/11/27) 0.0% (A) (08/11/21) 395.79 (10/11/2) (09/3/12) 2 300 (C) (yy/m/d) 200 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 11/9/30Source: Nomura4 Technical insight
  5. 5. Nomura Investment Strategy2. Share price performance for TOPIX Core 30 Index stocks Deviation from moving a verage Share price Change in share price (%) (%) (8 Dec Vs end- Vs end- Latest price Latest price Code YTD high (yy/m/d) YTD low (yy/m/d) (25-day) (90-day) (200-day) close) Nov 2009 vs YTD low vs YTD high 10,232.3 Nikkei Average 11,339.30 (10/4/5) 8,824.06 (10/8/31) 3.0 -3.0 16.0 -9.8 3.7 7.6 3.2 3 TOPIX 887.39 998.90 (10/4/15) 803.12 (10/11/2) 3.1 -2.2 10.5 -11.2 3.8 5.7 1.0 TOPIX Core30 486.64 561.81 (10/4/15) 438.37 (10/11/1) 2.5 -5.6 11.0 -13.4 3.4 5.4 0.2 TOPIX Large70 874.22 969.02 (10/4/27) 770.57 (10/8/31) 3.1 1.7 13.5 -9.8 3.2 6.5 2.6 TOPIX Mid400 902.93 1,011.87 (10/4/26) 820.69 (10/11/2) 3.3 -2.0 10.0 -10.8 3.9 4.9 0.4 TOPIX Small 901.47 1,022.31 (10/4/26) 788.39 (10/11/2) 4.9 -0.1 14.3 -11.8 6.6 6.6 1.1 2914 Japan Tobacco 291,000 358,000 (10/1/13) 243,900 (10/10/29) 2.0 -7.0 19.3 -18.7 3.7 6.3 -0.5 3382 Seven & i Holdings 2,091 2,468 (10/4/15) 1,848 (10/11/1) 2.2 10.2 *4 13.1 -15.3 3.5 4.8 0.5 4063 Shin-Etsu Chemical 4,190 5,720 (10/4/5) 3,810 (10/8/25) 2.4 -19.9 [3] 10.0 -26.7 [5] 1.5 0.2 -8.2 [5] 4502 Takeda Pharmaceutical 3,970 4,300 (10/3/19) 3,690 (10/5/27) 2.1 3.7 7.6 -7.7 1.5 1.2 0.5 4503 Astellas Pharma 3,050 3,620 (10/1/20) 2,828 (10/7/21) 1.7 -11.8 7.9 -15.7 0.0 [3] 1.0 -1.7 5401 Nippon Steel 288 395 (10/1/12) 250 (10/10/29) 4.0 *5 -23.2 [2] 15.2 -27.1 [4] 5.1 2.5 -5.9 * 6301 Komatsu 2,496 2,500 (10/12/8) 1,571 (10/7/1) 7.7 *1 29.1 *2 58.9 *1 -0.2 *1 9.7 *1 26.3 *1 33.4 *1 6502 Toshiba 437 556 (10/4/30) 380 (10/9/2) 0.2 [2] -14.5 15.0 -21.4 2.8 5.0 -2.2 6752 Panasonic 1,190 1,585 (10/1/15) 1,027 (10/8/25) -1.2 [1] -10.2 15.9 -24.9 -0.8 [1] 4.1 -1.7 6758 Sony 3,040 3,645 (10/3/23) 2,258 (10/7/6) 2.3 13.9 *3 34.6 *5 -16.6 6.6 *3 14.1 *2 7.3 *5 7201 Nissan Motor 815 845 (10/4/6) 600 (10/7/22) 3.8 0.6 35.8 *4 -3.6 *3 4.1 13.8 *3 14.0 *3 7203 Toyota Motor 3,280 4,235 (10/1/21) 2,800 (10/11/1) 1.9 -15.5 [5] 17.1 -22.6 4.1 8.4 1.5 7267 Honda Motor 3,135 3,410 (10/1/15) 2,470 (10/7/6) 4.2 *4 0.8 26.9 -8.1 3.6 7.3 6.4 7751 Canon 4,085 4,520 (10/4/5) 3,205 (10/7/1) 3.5 4.5 27.5 -9.6 3.2 8.0 6.5 7974 Nintendo 23,520 32,950 (10/4/5) 20,180 (10/10/13) 3.5 6.7 *5 16.6 -28.6 [3] 8.1 *2 4.6 -6.8 8031 Mitsui & Co 1,379 1,665 (10/4/12) 995 (10/7/6) 5.5 *2 5.2 38.6 *3 -17.2 4.3 11.3 6.6 8058 Mitsubishi Corp 2,179 2,542 (10/1/15) 1,784 (10/9/1) 3.0 -5.5 22.1 -14.3 3.5 10.1 5.3 8306 Mitsubishi UFJ FG 402 520 (10/4/15) 364 (10/11/1) 1.5 -11.1 10.4 -22.7 2.3 0.0 [5] -6.5 8316 Sumitomo Mitsui FG 2,620 3,355 (10/4/15) 2,325 (10/11/2) 2.0 -0.9 12.7 -21.9 3.4 3.2 -3.1 8411 Mi zuho Financial Group 137 196 (10/3/26) 110 (10/10/4) 3.0 -17.5 [4] 24.5 -30.1 [2] 6.2 *4 6.2 -8.7 [4] 8604 Nomura Holdings 490 783 (10/1/12) 395 (10/11/2) 1.7 -28.0 [1] 24.1 -37.4 [1] 5.4 *5 6.1 -8.8 [2] 8766 Tokio Marine Holdings 2,389 2,910 (10/4/16) 2,223 (10/10/29) 0.9 [4] -5.6 7.5 [5] -17.9 0.8 [4] 1.9 -2.8 8802 Mitsubishi Estate 1,443 1,723 (10/4/30) 1,153 (10/7/22) 2.2 -2.4 25.2 -16.3 -0.4 [2] 4.9 2.9 9020 East Japan Railway 5,220 6,750 (10/4/7) 4,790 (10/11/17) 4.4 *3 -11.1 9.0 -22.7 4.8 -0.4 [4] -8.7 [3] 9432 NTT 3,815 4,075 (10/1/15) 3,580 (10/6/10) 0.7 [3] 4.5 6.6 [2] -6.4 *4 0.8 [4] 2.6 1.4 9433 KDDI 487,000 553,000 (10/1/15) 387,500 (10/10/4) 1.8 -1.2 25.7 -11.9 2.6 12.6 *5 10.0 *4 9437 NTT Docomo 137,600 154,400 (10/4/20) 129,600 (10/1/5) 1.3 [5] 6.2 6.2 [1] -10.9 1.0 -1.3 [2] -1.4 9501 Tokyo Electric Power 1,984 2,504 (10/1/25) 1,853 (10/10/28) 1.7 -15.0 7.1 [4] -20.8 3.2 -8.3 [1] -13.7 [1] 9503 Kansai Electric Power 2,050 2,203 (10/9/7) 1,919 (10/10/15) 1.8 -2.4 6.8 [3] -6.9 *5 1.0 -1.0 [3] -2.1 * 9984 Softbank 3,000 3,085 (10/12/8) 1,997 (10/5/7) 3.4 38.2 *1 50.2 *2 -2.8 *2 5.0 13.0 *4 22.2 *2Note: (1) Year-to-date high (low) is closing-price basis for indices and continuous session basis for individual stocks. (2) New year-to-date highs recorded in December denoted by * in front of the stock code, new year-to-date lows denoted by . (3) Latest price versusyear-to-date low (high) is the change in the stock price from the year-to-date low (high) to the latest closing price. (4) For change inshare price and deviation from moving average, top five gainers denoted by *1–5, bottom five losers denoted by [1–5].Source: NomuraTechnical insight 5
  6. 6. Nomura Investment StrategyJapan 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 11/9/30Source: Nomura6 Technical insight
  7. 7. Nomura Investment Strategy2. Price data and major chart points 3. Daily candlestick chart Closing 2010/12/8 291.0 Diff (%) P/E (forecast) (x) 25.3 price Prev mo-end 285.4 2.0 P/B (x) 1.80 (¥ 000) (¥ 000) Prev yr-end 313.0 -7.0 ROE (forecast) (%) 7.1 320Mkt cap (¥bn) 2,910 Div yield (%) 1.92 301.5YTD high 358.0 -18.7 β vs TOPIX (180-day) 0.93 (11/24)(High→latest) (10/1/13) Oscillators Daily Weekly 293.4 294.0 300YTD low 243.9 19.3 RSI (25) 70.0 47.7 (7/28) (9/16)(Low→latest) (10/10/29) Psych line (12) 50.0 41.7Historical high 708.0 -58.9 Stoch-fast (13,9) 54.8 59.9 274.9(High→ latest) (07/12/21) Stoch-slow (3) 59.6 53.0 280 (10/26) Key moving avgs Diff (%) Momentum Long margin (thou shs) 2.06 Ratio (x)5-day 290.0 0.3 up Short margin (thou shs) 8.98 0.2325-day 282.3 3.1 up Fib retrace I II III 26075-day 272.9 6.6 up High 100% 708.0 708.0 257.6200-day 292.3 -0.5 down 76.4% 591.9 571.3 25-day mov avg ↑ (9/1)5-wk 288.7 0.8 up 61.8% 520.1 486.7 75-day mov avg 150 246.413-wk 275.4 5.7 up 50.0% 462.0 418.4 240 243.9 200-day mov avg 100 (10/13)26-wk 275.7 5.5 down 38.2% 403.9 350.1 (10/29) ↓52-wk 297.7 -2.2 up 23.6% 332.1 265.5 5012-mo 294.3 -1.1 down Low 0.0% 216.0 128.8 (y y /m/d) 220 024-mo 282.8 2.9 down Ichimoku chart pts Daily Weekly Monthly 10/7/1 10/7/1 10/8/13 10/9/28 10/9/28 10/11/11 10/12/27 11/2/1060-mo 417.1 -30.2 down Cloud upper 269.0 309.6 447.8120-mo 302.7 -3.9 up Cloud lower 262.4 299.4 438.0Source: Nomura Source: Nomura4. Monthly candlestick chart (logarithmic) (5) (¥ 000) 708 (07/12) 700 24-month mov avg (B) 60-month mov avg 500 120-month mov avg (1) 358.0 I 400 (10/1) 308 (99/7) (A) II 300 240 (94/10) 204 243.9 (96/2) 182.8 216.0 (10/10) 200 5,000 (01/7) (09/3) 4,000 150 (C) 3,000 142 149.6 139 (97/1) 137.2 128.8 (95/6) (01/12) 2,000 (00/3) (03/4) 100 1,000 (CY) 0 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012Source: Nomura5. Yearly candlestick chart (logarithmic) 6. Advances/declines (since Nov 1994) No. of ups/downs (vs TOPIX) No. of hi/lo up down avg rtn up down avg rtn highs lows (¥ 000) 708 Jan 6 10 -3.4 4 12 -2.3 4 6 (07/12) Feb 8 8 -0.6 8 8 0.2 1 0 700 Mar 13 3 2.5 9 7 0.9 0 3 500 Apr 7 9 1.7 5 11 -0.3 0 1 May 12 4 1.5 11 5 2.7 0 0 400 308 Jun 7 9 -0.3 8 8 -1.3 1 1 (99/7) 300 Jul 11 5 1.8 11 5 2.8 2 0 Aug 9 7 0.8 9 7 2.4 1 0 216.0 Sep 11 5 0.9 10 6 2.1 0 0 200 Oct 9 7 -2.6 10 6 0.2 2 2 (09/3) 150 Nov 9 8 -1.5 10 7 -1.9 1 0 142 Dec 13 4 4.6 11 6 3.9 5 4 128.8 (95/6) Jan-Mar 8 8 -1.6 5 11 -1.6 5 9 100 (03/4) (CY) Apr-Jun 10 6 3.1 9 7 1.3 1 2 Jul-Sep 11 5 3.1 12 4 7.0 3 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 Oct-Dec 10 6 1.2 10 6 2.9 8 6 Jan-Dec 8 8 7.0 10 6 11.1 17 17Source: Nomura Source: NomuraTechnical insight 7
  8. 8. Nomura Investment StrategySeven 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 11/9/30Source: Nomura8 Technical insight
  9. 9. Nomura Investment Strategy2. 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 avgMkt cap (¥bn) 1,854 Div yield (%) 2.67YTD 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) 2,117YTD 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 2,064Historical 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) 2,0005-day 2,095 -0.2 up Short margin (mn shs) 0.68 0.6225-day 2,030 3.0 up Fib retrace I II III75-day 1,984 5.4 up High 100% 5,420 18,290200-day 2,081 0.5 up 76.4% 4,573 14,406 1,900 1,909 ↑ 1,8915-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 8,11852-wk 2,061 1.4 up 23.6% 2,678 5,715 5012-mo 2,062 1.4 up Low 0.0% 1,831 1,831 (yy/m/d) 0 1,70024-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 11/2/1060-mo 2,919 -28.4 down upper cloud 1,967 2,188 3,707120-mo 3,393 -38.4 down lower cloud 1,926 2,150 2,885Source: Nomura Source: Nomura4. 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 2012Source: Nomura5. 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 32Source: Nomura Source: NomuraTechnical insight 9
  10. 10. Nomura Investment StrategyShin-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 11/9/30Source: Nomura10 Technical insight
  11. 11. Nomura Investment Strategy2. Price data and major chart points 3. Daily candlestick chart Closing 2010/12/8 4,190 Diff (%)P/E (forecast) (x) 16.5 (¥) price Prev mo-end 4,090 2.4 P/B (x) 1.26 (¥) Prev yr-end 5,230 -19.9 ROE (forecast) (%) 7.7 5,200Mkt cap (¥bn) 1,811 Div yield (%) 2.38 25-day mov avgYTD high 5,720 -26.7 β vs TOPIX (180-day) 1.40 5,000 75-day mov avg(High→latest) (10/4/5) Oscillators Daily Weekly 4,800 200-day mov avgYTD low 3,810 10.0 RSI (25) 58.6 39.9 4,545(Low→latest) (10/8/25) Psych line (12) 50.0 66.7 4,600 (10/15)Historical high 9,580 -56.3 Stoch-fast (13,9) 66.7 49.9(High→latest) (07/7/13) Stoch-slow (3) 68.1 53.3 4,400 Key moving avgs Diff (%) Momentum Long margin (mn shs) 1.87 Ratio (x)5-day 4,194 -0.1 up Short margin (mn shs) 0.46 4.05 4,20025-day 4,136 1.3 up Fib retrace I II III75-day 4,183 0.2 up High 100% 9,580 9,580 4,000200-day 4,563 -8.2 down ↑ 76.4% 8,122 7,542 3,9705-wk 4,160 0.7 up 61.8% 7,219 6,281 200 3,800 (11/1)13-wk 4,222 -0.8 down 50.0% 6,490 5,261 150 3,81026-wk 4,221 -0.7 down 38.2% 5,761 4,242 (8/25) ↓ 100 3,60052-wk 4,650 -9.9 down 23.6% 4,858 2,981 50 (yy/m/d)12-mo 4,480 -6.5 down Low 0.0% 3,400 943 0 3,40024-mo 4,681 -10.5 up Ichimoku chart pts Daily Weekly Monthly 10/7/1 10/8/13 10/9/28 10/11/11 10/12/27 11/2/1060-mo 5,912 -29.1 down upper cloud 4,244 5,105 6,565120-mo 5,124 -18.2 down lower cloud 4,178 5,025 5,920Source: Nomura Source: Nomura4. Monthly candlestick chart (logarithmic) (5) (¥) 9,580 10,000 (3) (07/7) 24-month mov avg (B) 6,630 7,000 60-month mov avg (00/3) 5,920 6,010 (02/3) (09/9) 120-month mov avg 4,980 (03/9) I 5,000 3,600 (97/10) (A) 3,260 3,390 3,550 3,810 II 3,000 2,219 (1) 2,210 (04/8) 3,400 (10/8) 2,190 (01/10) (03/4) (08/12) (87/10) (89/4) (94/6) 2,000 1,667 (4) (C) (91/4) 1,951 5,000 (98/9) 1,500 4,000 1,295 1,362 (95/6) 3,000 1,000 (88/10) 1,162 (92/8) 2,000 943 (90/10) 1,000 (2) (CY) 0 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012Source: Nomura5. Yearly candlestick chart (logarithmic) 6. Advances/declines (since Feb 1970) No. of ups/downs (vs TOPIX) No. of hi/lo up down avg rtn up down avg rtn highs lows (¥) 9,580 Jan 31 9 4.1 25 15 2.6 4 11 6,630 (07/7) 10,000 Feb 20 21 1.2 18 23 0.6 1 0 (00/3) 5,000 Mar 30 11 4.5 24 17 2.6 3 1 2,219 Apr 27 14 3.5 22 19 2.0 8 2 3,260 3,400 (89/4) May 20 21 -0.1 17 24 -0.5 4 1 2,000 (01/10) (08/12) Jun 15 26 -1.0 15 26 -1.5 4 4 1,000 Jul 25 16 0.9 23 18 0.8 3 3 943 Aug 24 17 -0.8 20 21 -0.4 0 3 (90/10) Sep 22 19 -0.7 19 22 0.6 2 3 500 Oct 23 18 0.8 22 19 1.9 6 6 200 Nov 22 19 -0.1 22 19 -0.4 2 4 Dec 26 15 1.8 22 19 0.2 4 3 100 Jan-Mar 31 9 9.8 21 19 5.7 8 12 (CY) Apr-Jun 20 21 2.5 18 23 0.0 16 7 Jul-Sep 22 19 -0.5 19 22 0.8 5 9 1970 1975 1980 1985 1990 1995 2000 2005 2010 Oct-Dec 23 18 2.5 22 19 1.6 12 13 Jan-Dec 27 13 15.2 23 17 8.4 41 41Source: Nomura Source: NomuraTechnical insight 11
  12. 12. Nomura Investment StrategyTakeda 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 11/9/30Source: Nomura12 Technical insight

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