SoftBank Group: Continued rebound or a pause? Is the current stock price driven by expectations or fair valuation?

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Conclusion:

The Nikkei Stock Average fell back to 50,219 yen (-293 yen). Due to profit-taking after the previous day's record high and supply-demand imbalances, investors are in a situation where they 'cannot sell even if they want to'. For the short term, secure profits through split selling and trailing stops; for the medium to long term, manage cash ratios incrementally and avoid contrarian trading.

Outline:

Chapter 1: Summary of Today's Market
・Briefly grasp the pullback the day after hitting a record high using key figures and contribution levels
・Confirm the broad-based decline trend through sector strength and the number of advancing/declining issues

Chapter 2: Short-term Factors for the Decline
・Dominance of profit-taking, impact of headlines on exchange rates and overseas stocks
・Organize supply and demand-driven movements after reaching major milestones in chronological order

Chapter 3: The Nature of the Dilemma
・Decision-making stalls due to the disposition effect and anchoring
・NISA/tax implications and thin order books at major milestones make selling difficult

Chapter 4: Practical Responses
・Standardizing split-selling rules, trailing stops
・Risk management during absence using OCO/IFD-OCO, criteria for the decision to "do nothing"

Chapter 5: Scenario-based Actions
・Bullish: Gradually accumulate if the 50,000 yen level is established (avoid contrarian trading)
・Neutral: Prioritize rules for rotation within the 49,000 to 51,000 yen range
・Bearish: Mechanically increase cash ratio if the range is broken to the downside

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Chapter 1: Summary of Today's Market

After fluctuating from the morning session, the Nikkei Stock Average ended trading at50,219.18 yen (-293.14 yen, -0.58%), marking its first pullback in three days.The previous day saw a sharp rise as it topped the 50,000 yen level for the first time, and the sense of achievement along with profit-taking flows suppressed the upside throughout the day. The number of advancing issues on the TSE Prime market was 88, while 1,507 declined and 16 remained unchanged. Trading value for the entire TSE expanded to 5.8852 trillion yen, and volume reached 2.29292 billion shares, suggesting a consolidation of trades at the previous day's high levels in both value and quantity. The overall market sentiment wasa broad-based decline,with the market breadth being weaker than the index's negative movement. 

In terms of contribution, Fast Retailing <9983> was the top drag, contributing approximately -54 yen. This was followed by Nidec <6594>, Nitto Denko <6988>, Fanuc <6954>, and Advantest <6857>, which weighed on the index. On the other hand, SoftBank Group <9984> led the upside with a contribution of approximately +166 yen, followed by Tokyo Electron <8035> with approximately +84 yen, while Chugai Pharmaceutical <4519>, Furukawa Electric <5801>, and DeNA <2432> made small positive contributions. In a high-price environment where contributions from constituent stocks are unlikely to balance out, the movements of the top few stocks effectively dictated the direction of the index. 

Regarding individual news, Nidec shares were quoted lower during trading hours following reports of its designation as a stock under special supervision and its removal from the Nikkei 225, which also spilled over into some related precision and electronics stocks. The expansion of its negative contribution weighed on the index, leaving a lack of recovery from the morning session through to the close. Meanwhile, semiconductor manufacturing equipment giant Tokyo Electron maintained a firm tone, and with the strength of SoftBank Group, provided a certain level of support for the downside. It is undeniable that the contrast between these large-cap stocks made the index's decline appear relatively smaller. 

By sector, shipping and information/communication performed well until the early afternoon session, but by the close,only information/communication rose,while cyclical and material-related sectors such as construction, metal products, mining, textiles, and glass/ceramics ranked among the top decliners. In terms of indices, the TOPIX, which is composed of a wide range of stocks, was also soft, with the cash index falling to 3,285.87. TOPIX futures based on the settlement price closed at 3,295, leaving a slight premium over the cash index. These indicate that while some major growth stocks supported the index, the recovery of value and cyclical stocks was limited. 

Overall, today was a day where the unwinding of short-term positions built up by the previous day's surge and the concentration of funds into a few major stocks coexisted. While the decline in the index itself appears limited, the status of advances/declines and the breadth of sectors suggest a strong risk-off tone. Grasping the fact ofa pullback the day after a record highand the weakness in market breadth characterized bya broad-based declinesimultaneously is the premise for tactical planning from tomorrow onwards. 

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Chapter 2: Short-term Factors for the Decline

In the market immediately after hitting a record high,profit-taking was dominant,and position adjustments by short-term players took precedence. There was a strong sense of achievement after reaching the 50,000 level for the first time in history the previous day, and the environment was prone to selling on rallies even for major stocks with large index contributions. The first thing to note is that the day after breaking through a milestone is prone to technical selling and arbitrage unwinding. The previous day's rise was heavily event-driven, backed by policy expectations, and the reaction to that led short-term price discovery on the day. 

This reaction is easy to understand by following the timeline of this month's headlines. Buying accelerated in early October due to expectations of a new administration, followed by record levels upon the confirmation of the Prime Minister's nomination, and finally, the heat peaked upon reaching the recent milestone. As a result, profit-taking on the sharp gains made up to the previous day naturally increased, and short-term supply and demand dictated the market's direction. This is a textbook movement wherethe market immediately after reaching a major milestone is prone to being supply-and-demand driven.

Exchange rates also shook short-term market sentiment. From the morning, the dollar-yen pairshifted toward a stronger yenfrom its high levels of the previous day, falling to the high 151 yen range during Tokyo trading hours. This was influenced by the US Treasury Secretary's remarks regarding Japan and speculation ahead of the Bank of Japan meeting, creating a headwind for the assumed exchange rates of export-related companies. Selling on rallies is likely for stocks with large foreign demand contributions such as Toyota Motor, Sony Group, and Honda, which suppressed the upside of the index. Even if the fluctuation in the exchange rate itself is limited, investor risk tolerance tends to decrease at high price levels, spurring short-term profit-taking. 

Regarding individual news, Nidec's sharp drop chilled market sentiment. During trading hours, news of the exchange's special caution andthe decision to remove it from the Nikkei 225was reported, causing the stock price to fall significantly. The decline of a core company that is difficult to replace among index-constituent stocks is likely to affect the supply and demand of related precision and electronics stocks. In addition, selling demand from index-linked funds and hedging sales of futures were triggered, accelerating the deterioration of short-term supply and demand. Suchnegative news for individual large-cap stockstends to strengthen the downward bias when it occurs simultaneously with profit-taking after an event. 

Overseas cues were neutral, but the price movement in the Tokyo market was prone to being heavy compared to the magnitude of the previous day's gains. While major US stock indices had maintained relative firmness recently, domestic movements led by futures outweighed cash supply and demand, leading to a chain reaction of arbitrage unwinding and cash selling. In particular, for high-beta semiconductor-related stocks, there was an increase in waiting-to-sell orders for Tokyo Electron and Advantest, which were bought the previous day, and buying interest for dips retreated due to awareness of execution costs in thin order books. As a result, a market environment with strong short-term speculative colors continued, where the decline of a few major stocks directly dictated the index direction. 

Organizing the short-term mechanism: first, profit-taking as a reaction to event-driven gains; second, the reversal of the exchange rate toward a stronger yen; third, sudden news regarding index-constituent large-cap stocks like Nidec; and fourth, the unwinding of arbitrage linked to futures. The third point, in particular, is likely to spill over into the sentiment of the entire market through its contribution to index calculation. In a phase wheresupply and demand lead prices, the direction of the flow is more likely to win than the quality of the news,so investors need to execute trades while being aware of the chain reaction of price movements. 

In summary, today's decline was ashort-term supply-and-demand marketdriven by position adjustments after reaching a milestone, a slight strengthening of the yen, and negative news for individual large-cap stocks, rather than a sudden change in the external environment. Therefore, while volatility is likely to be high on a daily basis, it cannot be said that the fundamental trend has immediately reversed. What is required of investors is to check the volume and arbitrage balance around index milestones, option barrier levels for exchange rates, and the news flow of index-constituent large-cap stocks in chronological order to quickly catch signs of a change in the direction of the flow. For tomorrow, whether the headlines on exchange rates and individual large-cap stocks settle down will be the initial condition for measuring the room for a short-term rebound. 

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Chapter 3: The Nature of the Dilemma

The root of why investors feel they "cannot sell even if they want to" involves two habits of behavioral finance and three circumstances of market systems.The first habit is the disposition effect, the tendency to lock in gains early while delaying the realization of losses. Since being presented by Shefrin and Statman, it has been confirmed in numerous empirical studies and is considered to systematically distort the judgment of individual investors. The second is anchoring, where judgments are easily bound to reference points such as acquisition cost or recent highs. For example, just by being aware that one bought at 10,000 yen, an anchor of the illusion of a "fair price" is dropped around that level, slowing down the decision to close out positions. It has been organized that this psychology also influences investment behavior in Japan. 

The first institutional aspect isthe reuse of the new NISA quota.From 2024, the tax-exempt holding limit became18 million yen for a lifetime (12 million yen for the growth investment quota),and a mechanism was introduced wherethe book value equivalent is restored from the following yearif sold. Rationally, this encourages agile reallocation, but the psychology of wanting to preserve "empty space" in the quota and the fact that restoration is only from the following year can be a factor thatdelays the timing of selling.Especially for those who hold large-cap stocks heavily, the moment they feel they cannot reinvest within the current year, their fingers stop. 

The second isthe constant burden of the tax system.In taxable accounts, capital gains and dividends from listed stocks are in principlesubject to separate self-assessment taxation of 20.315%, and while there is room for tax loss harvesting or choosing the filing method, the framing that tax is finalized the moment a latent gain is realized acts as resistance to profit-taking.Especially for investors who advocate long-term holding, this combines with anchoring—the thought that "it might still grow"—making it easy to postpone selling. 

The third isthe thinness of order books and price milestones near major levels.The Tokyo market's order book thickness changes by price range and stock due to the design of tick sizes and update price ranges. Around major milestones or round numbers,price clustering is likely to occur, and slippage is likely to expand if market sell orders are placed.While the TSE's trading system is supported by high-speed continuous trading, the unit of tick sizes and the operation of special quotes directly affect execution costs, and the fear that "it will slip if I push" leads to avoiding sales. 

Looking at actual examples, high-priced stocks where acquisition costs tend to be high, such asKeyence <6861> and Nintendo <7974>,have clear psychological round numbers, and anchoring and thin order books are likely to synergize. Even in the mid-price range, for stocks like Recruit Holdings <6098> where index contribution and overseas investor flows are involved, supply and demand imbalances at the close are visualized, and investors miss selling opportunities while trying to avoid market-on-close orders. For dividend-focused stocks like KDDI <9433> and Kao <4452>, the awareness that "selling will finalize taxes" around dividend ex-dates or shareholder benefit record dates tends to win, making the postponement of profit-taking a common occurrence. In financial stocks like Mitsubishi UFJ Financial Group <8306>, which have a broad investor base, the logic of dividend reinvestment and the anchoring of "long-term themes" overlap, and ultimately the decision is postponed with the thought that "it doesn't have to be today." 

Also, news headlines themselves become a mirror of investor psychology. This time, major media used the expression"cannot sell even if they want to,"visualizing the process where the market atmosphere tilts toward "wait and see." Headlines are not rational analysis, but they function as a reference point for the group and can also becomethe foundation for anchoring.

In short, investors are reluctant to sell because human habits ofthe disposition effect and anchoringare compounded bythe design of NISA quota reuse, immediate tax finalization, and execution risks near major milestones.Even if the system is neutral, the investor's heart is not. That is precisely why, unless you setrules,rather than prices, as your reference point, the order book and headlines in front of you will constrain your next move. 

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Chapter 4 Practical Responses

The more the market fluctuates in high-price ranges, the more effective it is to incorporate decision-making into a system. In this chapter, based on standardizing split selling and trailing stops, we will define risk management during absences using OCO/IFD-OCO, as well as criteria for the "decision not to act" as a practical matter. The key is to adjust thresholds and lot allocations according to the characteristics of each stock. First is split selling. A three-stage basic design is recommended. Set the initial position to 100 and close it out in the order of 30, 30, and 40 depending on the profit margin. Thresholds should be changed based on the volatility of each stock. For example, for large-cap stocks with high trading volume and relatively moderate intraday price ranges, such as Toyota Motor <7203> or Sony Group <6758>,

a three-way split at profit margins of 5%, 10%, and 15% is practical. On the other hand, for stocks where daily price fluctuations are likely to be large depending on news, such as Daikin Industries <6367>, HOYA <7741>, or Oriental Land <4661>, use 7%, 14%, and 20%, prioritizing execution of the final tranche at the closing limit price or near the VWAP. The essence of split selling is to lighten the psychological burden with the first profit-taking while still leaving room for upside. By taking the first profit early, subsequent decisions become less likely to waver. Next is the trailing stop. A trailing stop is an order where the stop-loss price automatically rises in accordance with the stock price increase, and its advantage is that

you can grow your profits while ensuring you can exit if the price turns downward. There are two ways to implement this. One is the percentage method; for example, for holdings of Rakuten Group <4755>, have the stop-loss follow at 8% from the closing price during an uptrend. Another is the ATR-based method, where using a range such as 2 times the 3-day ATR or 1.5 times the 14-day ATR allows for automatic adjustment to the stock's unique price movements. While the name of the specification varies by company, the definition is common, and the wider the range, the more volatile the stock. You should confirm the setting concept through broker explanations or technical basics.  Split selling and trailing can be used together. For example, for medium-term holdings for dividend purposes like ORIX <8591>, the first 30 is mechanically taken at a 5% profit margin, while the remaining 70 is followed with a 12% trailing stop

. This allows you to recover capital in the initial move while leaving room for upside. For stocks like HOYA that are prone to gaps due to events, raise the initial profit-taking to 7% while widening the trailing range to 15% to avoid premature execution. The important thing is that once you decide on a threshold according to the stock's volatility characteristics, do not change it; the more you minimize discretion, the more stable your execution quality will be. For risk management during absences, utilize OCO/IFD-OCO

. OCO places a limit order for profit-taking and a stop-loss order simultaneously, and when one is executed, the other is automatically canceled. IFD-OCO is a composite type that starts with the execution of a buy order and then automatically places an OCO order. This allows you to decide both profit-taking and stop-loss in advance even during times when you cannot watch the market. It is available at major domestic securities firms, and detailed specifications and non-supported products are published. Since there are cases where fractional shares or PTS are not eligible, check each company's explanation before use.  Practical points to note are also organized. In the event of a gap down or a special quote, there is a possibility that a stop-loss order will be executed at a price less favorable than expected. This is due to the rules for board matching and special quotes, which temporarily suspend continuous execution to ensure price continuity. Therefore, immediately after earnings announcements or at the market open, widen the stop-loss range or avoid using market orders. It is a good rule to

execute only after confirming the status of the quote display.  Furthermore, codify the "decision not to act". One is setting event-prohibited zones. Prohibit new entries and follow-up selling for three business days before and after earnings announcements, and all day on the day of policy meetings or major indicators. The second is a liquidity filter; on days when trading volume falls below 50% of the 20-day average, refrain from selling other than for profit-taking. The third is a spread criterion; if the quote spread exceeds five times the tick size, wait for the limit price to improve. For stocks where the depth of the board is prone to fluctuation, such as Shimano <7309> or Omron <6645>,

thoroughly avoid using market orders when spreads worsen. The fourth is a time-of-day rule; since algorithmic executions increase in the last fifteen minutes of the session, avoid trading except for the final tranche of split selling. Quantify these, fix them in your operation notebook, and verify the deviation rate monthly. Finally, the design of the entire portfolio. Unify the thresholds for split selling and trailing by volatility bucket rather than by individual stock. For example, standardize in three stages in advance: 5% for low-volatility stocks like Toyota or Dai-ichi Life Holdings <8750>, 7% for medium-volatility stocks like Daikin or Oriental Land, and 10-12% for high-volatility stocks like Rakuten or Nintendo. The shortest distance to improving execution accuracy is to make no exceptions. By leaving selling decisions to the system

in this way, you can minimize the influence of market temperature and maintain a highly reproducible operation process even for busy business people.

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Chapter 5: Scenario-Based Actions

This chapter divides the index's positioning into three parts and specifies the practical aspects of holding, adding, and reducing positions by stock bucket. Decisions are based on the day's closing price, and execution is limited to the market open or close of the next business day to minimize volatility. The current reference point is 50,219.18 yen, and the recent exchange rate benchmark is around 152 yen to the dollar. Since risk changes for stocks with high import/export sensitivity based on this level difference, the daily trend of the exchange rate should also be checked simultaneously. 

【Bullish Scenario】Establishing the 50,000 yen range is confirmed, a phase where major stocks hit new highs and the breadth of gains improves. The action is gradual accumulation only; avoid contrarian buying on dips. In the growth bucket, increase weight in the order of SoftBank Group (9984), Tokyo Electron (8035), Advantest (6857), and KOKUSAI ELECTRIC (6525). For export/cyclical stocks, capture the tailwind of the exchange rate with Toyota (7203), Sony Group (6758), and Honda (7267). For defensive stocks, use Chugai Pharmaceutical (4519), KDDI (9433), and Nippon Telegraph and Telephone (9432) as a foundation for dividends and stable EPS. In addition to index strength, the return of net buyers and continued share buybacks are likely to act as tailwinds. Buying should be done in stages: add on rises, and stand aside on declines—adhere strictly to this one-way operation. 

【Neutral Scenario】A range of 49,000 to 51,000 yen continues. Here, prioritize rotation based on rules, lightening positions with large unrealized gains while shifting funds to high-conviction stocks. In the growth bucket, narrow the focus to Tokyo Electron and Advantest to increase weight, and avoid KOKUSAI just before events. In export/cyclical, cover the automotive value chain with Toyota and Denso (6902), and keep Keyence (6861) and Fanuc (6954) on watch for electronics/capital goods. For finance, make Mitsubishi UFJ Financial Group (8306) and Nomura Holdings (8604) the core, and only seek to capture contributions on days when interest rates and credit spread indicators stabilize. For defensive stocks, maintain KDDI and Kao (4452) with balanced allocation; prioritize reducing positions with unrealized gains when approaching the top of the range, and seal off new purchases when approaching the bottom, maintaining only existing strong stocks. Minimize discretionary intervention and stick to mechanical replacement.

【Bearish Scenario】 The index breaks below the range, and major trends collapse simultaneously. Here, increase the cash ratio mechanically. Liquidate gradually up to a maximum of 50% total: 10 points based on the first day's closing price, and another 10 points upon confirmation of further declines. Limit the remaining core to stocks with strong dividends and net cash, securing support with ORIX (8591), Dai-ichi Life Holdings (8750), and KDDI. In the growth bucket, reduce the ratio of SoftBank Group and semiconductor manufacturing equipment to soften the index-linked decline. If the exchange rate shifts to a sharp yen appreciation, the headwind for external demand will amplify, so reduce the holding ratio of export-related stocks early. Automating the decision to cash out based on price is the only way to avoid being swayed by headlines. 

Establish cross-bucket operational rules here as well. First, do not perform new diversified investments until the index meets bullish conditions; only increase weight in existing winning strategies. Second, define the rotation of major stocks. On days when funds shift from semiconductor manufacturing equipment to platforms, thin out Tokyo Electron and Advantest and ride only the upward wave of SoftBank Group. Third, the policy on event days. Seal off new positions around earnings announcements or policy event days, limiting actions to reducing or maintaining existing ones. Fourth, range management. The action range for each scenario is reviewed only during weekly verification, not changed based on daily moods or headlines. Media tone serves as a signal for market sentiment, but always determine actions based on price and rules. 

There are five items on the checklist. One, where is the closing price relative to the scenario threshold? Two, the day's exchange rate trend and the reaction of import/export sensitive stocks. Three, are major stocks chasing new highs or stalling while waiting for a rebound? Four, is the fund allocation within the bucket within pre-set rules? Five, are there any materials scheduled for announcement on the next business day? Confirm these in one minute and execute only the actions for the corresponding scenario. Stepping into funds only when the index position and flow direction match is the shortest path to fattening winning strategies and not expanding losing ones. 

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