The Tokyo Stock Market on Monday the 6th saw the Nikkei Stock Average rise 290 points to 53,413, extending gains from the previous trading day. One week prior, the index fell 1,487 points on a Monday; two weeks before that, it dropped 1,857 points; three weeks ago, the decline was modest, but four weeks back, it plunged 2,892 points. Many investors harbor fears of 'Black Monday,' and "not expanding long positions over the weekend has become an unwritten rule in recent market conditions," according to an online brokerage strategist. However, today saw short sellers scrambling to cover.

President Trump warned Iran that unless the Strait of Hormuz is reopened by the night of the 7th, the U.S. will destroy critical infrastructure including power plants and bridges. While this threat differs little from previous ones, timing the negotiation deadline to coincide with the arrival of the third carrier, the "Bush," following the "Lincoln" and "Ford," may be a characteristic display of Trump-style pressure. Yet Iran is unlikely to simply "surrender unconditionally." This deadline coincidentally falls at 9:00 AM Japan time on the 8th, the start of morning trading?an unwelcome development for investors. Given this environment, conventional thinking suggested a high probability of another 'Black Monday' today. However, the Nikkei opened sharply higher led by futures, surging over 900 points at one point and recovering above the 54,000 level by the morning close in an unexpected turn. Many attributed this to positive sentiment following a U.S. news site report that "the U.S., Iran, and Gulf region mediators are discussing a 45-day ceasefire." However, like past instances, the credibility of such reports remains questionable. Indeed, as if to confirm this, the Nikkei reversed downward from the afternoon opening after short-covering ran its course.

Investment strategy must focus on individual trees rather than the forest. However, for major semiconductor stocks that have already experienced significant rallies, concerns about selling on rebounds inevitably influence investor sentiment. While the idea that "now is a chance to buy low given how high they were in the past" is certainly valid, the critical question is whether earnings can maintain an expansion trajectory going forward. This is a fate common not only to semiconductors but to all stocks that gain popularity?past highs often frontload earnings realities that are years ahead. Even if a stock achieves the growth scenario as anticipated, its price may fail to clear previous highs due to such circumstances. When stocks that ran too far lose momentum, a reverse vector begins to apply. Even when bargain-hunting former star stocks at lower prices, investors lose the willingness to hold long-term positions, with their true intention being to take profits during any rebound. If everyone thinks alike, it stands to reason that upside remains limited.

ADVANTEST CORPORATION <6857>, for example, is representative. After forming a large bearish island reversal on January 29th, it miraculously broke through this pattern about a month later on February 26th, but ultimately closed with a bearish candle, forming a typical double top. While ADVANTEST's earnings are excellent and future growth prospects are unquestionable, there remains difficulty in simply declaring current price levels as buying opportunities. This is because it's uncertain how much of the company's near-future earnings reality the stock price has already priced in. Very few investors are currently buying the stock with the intention of holding until it returns to all-time highs. For genuine upside momentum to resume, positive catalysts with roughly twice the impact of previous ones would be required.

Currently, capital deployment offers greater expected returns in small- and mid-cap stocks less influenced by broad indices than in major stocks. In this context, retail investor funds and other sidelined capital hovering above the market appear to be focusing on small- and mid-cap semiconductor-related stocks. NIPPON THOMPSON CO.,LTD. <6480>, for instance, is on the verge of breaking out from the upper range of its box consolidation and warrants continued monitoring. Other stocks showing signs of movement include THine Electronics, Inc. <6769>, a pioneer in fabless semiconductor manufacturing; ISHII HYOKI CO.,LTD. <6336>, a major printed circuit board equipment manufacturer gaining demand related to AI servers; and OPTORUN CO.,LTD. <6235>, which excels in next-generation deposition technology and is seeing strong demand for deposition equipment for optical devices for AI data centers.

Furthermore, KITAGAWA SEIKI CO.,LTD. <6327>, which this column has featured several times since last year, has rapidly shifted to a recovery trend after adjusting from a major rally and requires close attention. Demand for copper-clad laminates (CCL), high-multilayer and high-performance printed circuit board materials for AI servers, is expanding rapidly, and demand for the company's vacuum large-scale presses for CCL molding is strong. In a complementary position to KITAGAWA SEIKI is TAIYO TECHNOLEX CO.,LTD. <6663>, which manufactures and sells flexible printed circuit board prototypes, and this stock is also showing increasing activity.

Tomorrow's schedule includes the February household survey and trade statistics for early to mid-March, both to be released before the market opens, as well as an auction for 30-year government bonds during morning trading hours. During afternoon trading, the February economic watchers survey (preliminary) and consumer activity index will be announced. One IPO is scheduled for the day, with Hito to Hito Holdings <549A> listing on the TSE Standard Market. Overseas, February U.S. durable goods orders and February U.S. consumer credit will be released, and a U.S. 3-year Treasury auction is also scheduled. Additionally, Fed Vice Chair Jefferson is scheduled to speak, with market attention focused on his remarks.

Source: MINKABU PRESS