Chart Of The Day Nikkei 225 may see the start of another bearish downleg

Short-term technical outlook on Japan 225 Index (Fri, 17 Nov)

Key technical elements

• Yesterday’s push up in price action of the Japan 225 Index (proxy for the Nikkei 225 futures) from the recent 21840 low has stalled right at a significant short-term resistance of 22800 which is defined by the former minor swing low area of 08 Nov 2017, the pull-back resistance of the former medium-term ascending channel (depicted in dotted brown) from 08 Sep 2017 low and the close to 61.8% Fibonacci retracement of the recent decline from 09 Nov 2017 high to 15 Nov 2017 low).
• In addition, yesterday’s upside momentum of the price action has started to wane as the 4 hour Stochastic oscillator has reversed down from its overbought region coupled with a bearish divergence signal seen in the 1 hour Stochastic oscillator.
• Based on intermarket analysis, the direct correlated USD/JPY has continued to exhibit weakness below its tightened key short-term resistance now at 113.30 with further downside potential towards the next intermediate support at 111.70 (click here to refer to “Chart Of The Day” published on Wed, 15 Nov).
• The next significant short-term support rests at 21650/600 which is defined by the minor swing low areas of 24/26 Oct 2017, the lower boundary of the minor descending channel in place since 09 Nov 2017 high (depicted in pink) and close to the 0.764 Fibonacci projection on the on-going decline from 09 Nov 2017 high projected to 15 Nov 2017 low projected to today current intraday high of 22760 (see 1 hour chart).

Key Levels (1 to 3 days)

Intermediate resistance: 22550

Pivot (key resistance): 22800

Supports: 21840 & 21650/600

Next resistance: 23010 (medium-term pivot) & 23420

Conclusion

Therefore, the Index may see the start of another potential bearish impulsive wave sequence at this juncture. As long as the 22800 short-term pivotal resistance holds, the Index is likely to shape another potential downleg to retest the recent swing low of 21840 before targeting the next intermediate support of 21650/600 in the first step.

On the other hand, a clearance above 22800 shall negate the bearish tone to see a push up to test the 23010 key medium-term pivotal resistance. Only a clear break above 23010 will invalidate the bearish scenario to open up scope for the start of another potential bullish impulsive wave sequence towards 23420 in the first step.

Charts are from City Index Advantage TraderPro

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