In the July 8 issue of our swing trade newsletter, we pointed out that iShares MSCI Japan Index ($EWJ) was recovering nicely after a sharp selloff in late May/early June.

$EWJ recently put in a higher low on 6/24, and is now trading back above the 50-day MA. However, the chart does have some overhead to work through if/when it touches the $12 area. Because of this, trading top performing individual Japanese stocks showing relative strength, rather than buying the ETF, may be the way to go. Two such ADRs with bullish chart patterns are Sony ($SNE) and Toyota ($TM).

$TM is consolidating in a tight range in a seven week long base above the rising 50-day MA. It is showing relative strength to $EWJ as well, which we clearly see at the bottom of the chart with the relative strength line in a clear uptrend while $TM is in pullback mode. A pullback to the horizontal line around $123 would be an ideal entry point. This should also coincide with a touch of the 20-day EMA:



Like $TM, $SNE is outperforming $EWJ, as the relative strength line has broken out to new highs ahead of the price action, while the base in $SNE has held above the rising 50-day MA. $SNE is a breakout entry above $22.16, but a pullback to support around $21 to $21.50 would be ideal:

 

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.