* Nikkei pares losses as short-covering emerges
* Plays catch-up with Asian markets after 3-day weekend
* MACD pointing down, poised for bearish cross
* RSI, slow stochastic both nearing oversold zone
By Aiko Hayashi and Elaine Lies
TOKYO, July 20 (Reuters) - Japan's Nikkei average fell 0.9
percent but was off earlier lows on Tuesday, with tech shares hit
by worry over the pace of U.S. economic recovery, disappointing
U.S. corporate results and a strong yen.
Traders returned from a three-day weekend and were playing
catch-up with other Asian markets that fell on Monday due to a
sharp drop in U.S. consumer sentiment.
Charts suggested a further dip may still lie ahead, with the
Nikkei's MACD, a measure of market momentum, nearing a bearish
cross while its slow stochastic -- a measure of how oversold the
market is and whether it is in a short-term up or down trend --
continued to fall.
On Monday, Wall Street rose on hopes for earnings from Texas
Instruments <TXN.N> and fellow tech firm International Business
Machines <IBM.N>, but shares of both slumped in after-hours trade
as Texas Instruments' revenue failed to impress and IBM's revenue
missed expectations. [] []
But the dollar edged up against the yen <JPY=> after falling
to a seven-month low on Friday, helping the Nikkei pare losses as
short-covering emerged after the benchmark sustained its worst
one-day percentage fall in over a month on Friday. []
"It's a sign that the economic recovery is slowing down when
companies report profits that are above market expectations but
their sales figures remain sluggish," said Kazuhiro Takahashi,
general manager at Daiwa Securities Capital Markets.
"Still, the market had risen on expectations towards strong
profits, and things about sales numbers could have been used as
an excuse to sell for now. Companies are at least in a position
to produce profits now and hopes for the earnings season are
continuing."
Eyes remain on moves in the currency markets and U.S.
earnings results, market players said, with Goldman Sachs <GS.N>,
Apple Inc <AAPL.O> and Yahoo Inc <YHOO.O> set to report later on
Tuesday.
The benchmark Nikkei <> shed 81.09 points to 9,327.27
after earlier falling as much as 1.7 percent, while the broader
Topix <> lost 0.8 percent to 834.22.
Japanese markets were closed on Monday for a holiday and on
Friday the Nikkei fell nearly 3 percent as investors took
profits.
On Monday, the NAHB/Wells Fargo Housing Market index fell
more than expected in July to its lowest level since April 2009
after a popular tax credit for homebuyers expired in April,
underlining fears about the economic recovery ahead of housing
data including housing starts on Tuesday.
"There's a slight ebbing of risk avoidance but some of the
U.S. results are cause for concern, especially some not very good
forecasts for later in the year, and this is affecting the
Nikkei," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ
Morgan Stanley Securities.
"A substantial break below 9,200 would leave us with few real
support levels until around 9,000, but we'd probably need a
substantial drop in either overseas stock markets or a surge in
the yen for this to happen."
Market players said support for the Nikkei was likely to hold
for now at 9,200, just under its July 1 close, which was a
seven-month closing low.
While charts look bearish, the benchmark is also approaching
oversold levels on some fronts. Its relative strength index (RSI)
hit 40, its lowest in roughly two weeks, with anything from 30
and below considered oversold, and its slow stochastic was
approaching oversold territory.
TECH TROUBLES
Tech shares were hit by disappointment over U.S. corporate
results, but pared earlier losses. The dollar was up 0.3 percent
against the yen at 86.98 yen.
Chip gear manufacturer Tokyo Electron <8035.T> lost 2.6
percent to 4,695 yen and electronic components maker TDK Corp
<6762.T> shed 2 percent to 5,000 yen. Sony Corp <6758.T> fell 2.5
percent to 2,344 yen.
Other exporters also fared poorly. Investors fret about a
stronger yen since it eats into exporters' profits when they are
repatriated.
Toyota Motor Co <7203.T> slid 2.2 percent to 3,065 yen and
Honda Motor Co <7267.T> fell 2 percent to 2,600 yen.
Shares of Daiwa Securities Group <8601.T>, Japan's
second-largest brokerage, declined 2.6 percent to 378 yen after
the Nikkei business daily reported the company likely suffered a
loss in April-June, as financial market turmoil stemming from the
Greek debt crisis took a toll.
The loss was likely between several billion yen and 10
billion yen ($115 million), marking a second consecutive loss for
the company, which trails Nomura Holdings Inc <8604.T> in Japan's
mature brokerage market, the Nikkei said.
But shares of Leopalace21 Corp <8848.T> rose 2.7 percent to
232 yen after Credit Suisse lifted its rating on the developer
and operator of apartments and hotels to "neutral" following its
tumble close to the broker's target price of 230 yen.
Leopalace's stock had lost more than half its value over the
past three months. Credit Suisse attributed the recent slide to a
deterioration in occupancy rates, dwindling orders and unrealised
losses on apartments.
(Editing by Joseph Radford)
