This market isn’t done rallying yet: Technician

Japanese stocks are starting the month off strong.

On Monday, the Nikkei rose 2 percent, closing near a one-month high, after the Bank of Japan's decision to take interest rates into negative territory. And according to one technician, Japanese stocks aren't done with their rally just yet.

Craig Johnson of Piper Jaffray said that EWJ, the ETF that tracks Japanese stocks, is set up for a relief rally that will take the ETF as much as 8 percent higher.

"You'll see that the EWJ has gotten pretty oversold and is starting to bounce, money flow is starting to improve back into EWJ," Johnson said Friday in a "Trading Nation" segment.

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Stacey Gilbert of Susquehanna said while investors seem to be betting on more upside for Japanese stocks, they're favoring currency-hedged ETFs to account for weakness in the yen.

These ETFs include DXJ, HEWJ and DBJP, all of which have outperformed EWJ in the last week. Both HEWJ and DBJP have risen 6 percent in one week.

"If you look at the actual ETF side, this is where you see the most interesting activity with buyers of the currency-hedged ETF. This is different from what we've seen most of this year," Gilbert said Friday on "Trading Nation."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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