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Investing in Japanese Recovery
The world is still not over the shock of the terrible earthquake and tsunami that hit Japan recently. However, active investors and traders are already looking at investing in Japanese recovery. Investing in Japanese recovery can take several forms. It could be Forex trading the Yen, which has risen in value as Japanese companies and investors repatriate offshore assets. Investing in Japanese recovery can be done by doing Candlestick analysis on stocks that have seen their stock prices fall dramatically. Many of these companies have no production facilities in the Northeastern area of Japan directly affected by the natural disaster. One might well expect to see those stocks recover to their normal values. The trader who correctly reads market trends and market reversal with a close eye on Candlestick patterns may well profit by investing in Japanese recovery. Long term investing in traditionally strong companies like Toyota and Sony could be profitable if the trader is selling short during a market panic and buying stock at the turnaround. As usual the trader will look for signals such as the Doji Candlestick, which signals market indecision, to light the way.
Investing in Japanese recovery requires that the trader do both fundamental and technical analysis. Regarding fundamental analysis, news reports indicate that the Northeast coast of Japan is not the location of much industry. Thus few stocks will be directly affected by damage to company facilities. However, the damage to nuclear power plants and possibility of radiation leaks, meltdown, and loss of a substantial amount of power in the Japanese power grid could affect many companies distant from the actual earthquake and tsunami damage. In analyzing the fundamentals while investing in Japanese recovery the devil, as usual, is in the details. The problem for the investor who only relies on fundamentals to guide his buying stock, selling stock, trading options, and trading futures is that the fundamentals are rapidly absorbed and discounted by the market. Also, many stock price moves are related to the fundamentals but are more strongly driven by changes in market sentiment. Here is where the time honored use of Candlestick chart formations comes into play.