Market News & Analysis

Nikkei 225 – resting at 19460 key short-term support for a potential upleg towards major risk zone

Short-term Technical Outlook (Thurs, 05 Jan 2017)

japan-index-daily_05-jan-2017

japan-index-1-hour_05-jan-2017(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has surged as expected towards our medium-term upside target zone of 19860/20000 (printed a high of 19683 in yesterday’s U.S. session).

Please click on this link for a recap on our latest weekly technical outlook/strategy published on this Monday, 02 January 2017.

Key elements

  • Since hitting the high of 19683, the Index has started to pull-back by close to 1% to print a current intraday low of 19488. This decline in price action is line with a sell-off seen in the USD/JPY due to profit-taking after a breach on the 117.50/20 short-term support zone that occurred earlier at the 7.45am to 8.00 am Singapore timeslot. There is no key economic data catalyst that triggered the aforementioned sell-off in USD/JPY. Interestingly, today’s Asian session seen in the USD/JPY has led to come close to its key medium-term support at 116.00.
  • In parallel, the Japan 225 Index is now also trading right above the 19460 key short-term support as per defined by a confluence of elements (the former minor range resistance seen from 21 December to 28 December 2016, lower boundary of a short-term ascending channel in place since 31 December 2016 low & the 23.6% Fibonacci retracement of the most recent up move from 30 December 2016 low to yesterday’s U.S. session high of 19683) (see hourly chart).
  • The short-term hourly Stochastic oscillator has started to turn up from its extreme oversold region. This observation reinforces that the mean reversion decline in price action seen in today’s Asian session has reached a potential inflection zone where the Index is set resume its potential up move.

Key levels (1 to 3 days)

Pivot (key support): 19460

Resistance: 19860

Next support: 19180

Conclusion

Technical elements are still positive. As long as the 19460 short-term pivotal support holds, the Index may see a continuation of its up move to target the 19860 resistance.

However, a break below 19460 (hourly close) is likely to invalidate the preferred direct rise scenario to see a deeper slide towards the next support at 19180 (minor swing low area of 04 January 2017 & close to the 61.8% Fibonacci retracement of the up move from om 30 December 2016 low to yesterday’s U.S. session high of 19683).

Charts are from City Index Advantage TraderPro

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