Nikkei Breaks 9,600 to 6-1/2-Month High

(Reuters) - Japan's Nikkei share average extended its rally and rose to a 6-1/2-month high on Friday above 9,600, heading for its best February performance in two decades.

After the Nikkei ramped up 9.4 percent this month and 13.9 percent this year, strategists expect it to pull back in the near term, however.

I think the correction will come in March and April and it will fall back towards 9,000 or so due to earnings forecasts being revised down for next fiscal year, said Ryota Sakagami, chief strategist of equity research at SMBC Nikko Securities. That will weigh on the Japanese market.

The Nikkei <.N225> advanced 0.4 percent to 9,630.19 and the broader Topix <.TOPX> added 0.6 percent to 834.33, boosted by a weaker yen.

Honda Motor Co (7267.T) added 0.8 percent and Toyota Motor Corp (7203.T) gained 0.5 percent.

The benchmark Nikkei was deep in overbought territory, with the 14-day relative strength index at 81. Seventy or above is considered overbought.

Other technical indicators remained positive, however. The Nikkei's 25-day moving average broke above its 200-day average to form a golden cross on charts, while a golden cross was already formed with the 13-week and 26-week moving averages.

Nomura technical analyst Shoichiro Yamauchi said he expected the rally to pause for a week or two before the Nikkei tested 10,000, a level not seen since early August.

We see the next upside target as the 8 July 2011 rally high of 10,207, close also to the 10,169 level representing a rise of twice the magnitude of the decline from the October 2011 high to the November low, but we think a cooling off period of a week or two will be needed before an attempt is made at the 10,000 level, Yamauchi said in a note.

Global equities have been buoyed by a run of strong economic data out of the United States, as well as the European Central Bank's liquidity injection of nearly half a trillion euros and further easing steps by the Bank of Japan and the Bank of England.

Kyocera Corp (6971.T) lost 2.2 percent on Friday after Bank of America Merrill Lynch downgraded the electronics firm to hold from buy and cut its price target to 7,200 yen from 8,000.

(Reporting by Dominic Lau; Editing by Michael Watson)