THE Election of Japan's Liberal Prime Minister, Junichiro Koizumi, Last Year Raised Hopes among Investors That Measures Might Finally Be Implemented That Would Revive the Stagnant Japanese Economy

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THE election of Japan's Liberal prime minister, Junichiro Koizumi, last year raised hopes among investors that measures might finally be implemented that would revive the stagnant Japanese economy.

This optimism was reflected in share prices with a rally in the Nikkei 225 - halting a slide that had been gathering momentum since it peaked above 20,000 back in April 2000. However, optimism soon wanes when action is not forthcoming and the slide in share prices resumed - between May and September last year the index slumped by 5000 points, or 35%.

After those mid-September lows there was a rally of sorts, and the Nikkei managed to retrace its steps back to 11,000 in late November before starting to fall away again.

From a technical point of view the price action of the last four months is noteworthy. A well-known chart pattern, a pennant, appears to have formed. Pennants often denote consolidation periods that appear in the midst of a trend when the share price trades within a tightly defined range and the short-term trendlines slant towards each other. …