* Nikkei down 0.8 pct by midmorning
* Pushed lower by weak tech and banks U.S. earnings
* Foreigners buy Tokyo stocks for 11th straight week
* Market players say foreign buying may be peaking out
By Antoni Slodkowski
TOKYO, Jan 20 (Reuters) - Japan's Nikkei average dropped 0.8 percent on Thursday, poised to snap a three-day winning streak after weaker-than-expected earnings by key U.S. technology and banking firms prompted investors to lock in profits.
Expectations that Japanese companies will report a further recovery in profits when the earnings season starts in earnest later this month will prompt some investors to buy on dips and help limit the market's fall, market participants said.
They are watching how Chinese markets react to China's official December consumer price index and 2010 gross domestic product figures, scheduled to be announced at 0200 GMT on Thursday.
"The sharp fall in tech shares on Wall Street is prompting investors to take profits on chipmakers which have outperformed the market in recent weeks," said Shoji Yoshigoe, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co Ltd.
Foreign investors were net buyers of Japanese equities for an 11th straight week, with buying at a 9-month high, data showed on Thursday but market players said the trend could be nearing its end since the Nikkei has gained 15 percent since the start of November.
"A recovery in earnings for Japanese companies has been broadly priced in by investors and once the results are out the market may stop gaining and consolidate around 10,500 yen levels, but exact moves will depend on the figures and the exchange rate," Yoshigoe said.
By midmorning the benchmark Nikkei was down 0.8 percent or 82.02 points at 10,475.08.
The broader Topix index shed 0.7 percent to 930.45.
Yoshigoe also said that the dollar/yen rate would be a focus for trade on Thursday after it brushed 81 yen levels in Europe, adding to the pressure on tech shares and other exporters.
Technology shares were the worst performers on Wall Street on poor results from Cree and other LED lighting makers.
The world's third-biggest DRAM maker Elpida Memory Inc dropped 2.2 percent to 1,137 yen while Tokyo Electron Ltd was 2.8 percent lower at 5,590 yen. Disco Corp, a maker of semiconductor grinding and cutting equipment, lost 1.3 percent to 5,450 yen.
Construction machinery maker Komatsu Ltd was 1 percent lower at 2,536 yen and Canon Inc shed 1.9 percent to 4,115 yen.
With an improvement in Japanese earnings factored in, market will be focusing on how well-prepared the firms are to sustain an earnings recovery in the long run.
Analysts listed cost control, structural changes, exposure to growing Asian markets and foreign currency hedging as key points being watched by the market. (Reporting by Antoni Slodkowski; Editing by Edwina Gibbs)