Short-term technical outlook on Japan 225 Index (Thurs, 09 Nov)
Key technical elements
- The Japan 225 Index (proxy for the Nikkei 225 futures) had staged a magnificent rally of 22% from its 27 August 2017 low within a short-span of time (9 weeks). The current up move of 22% in terms of magnitude and time is the strongest since its current major cycle low of 14835 printed on 24 June 2016 (Brexit referendum). The risk of medium-term (1 to 3 weeks) corrective decline/consolidation increases at this juncture due to its overextended up move (see daily chart).
- In today (09 Nov) early Asian session, it has shaped another steep advance above the upper boundary of a medium-term ascending channel from 08 September 2017 low to hit the upper limit of our predefined medium-term resistance/target of 23260 (printed a high of 23420) (click here for a recap our weekly technical outlook published on Mon) before it reintegrated back below the upper boundary of a medium-term ascending channel. These observations suggest that the rally seen in today’s Asian session is a failure acceleration move which can be classified as a minor “Blow-off” top (depicted by the pink box) (see 1 hour chart).
- In addition, the daily RSI oscillator has started to revers down right below its extreme overbought level of 83% and it is now testing a significant corresponding ascending trendline support at the 70% level. These observations suggest the medium-term upside momentum of price action has started to ease.
- The daily price action has also formed an impending bearish “Spinning Top” candlestick pattern at the end of the Japanese cash trading session right at the 23080/260 medium-term resistance (that confluences with the upper boundary of a major ascending channel from 24 June 2016). Another bearish signal that supports the start of a potential medium-term corrective decline.
- Based on the Elliot Wave Principal/fractal analysis, the Index is likely to have completed an intermediate degree bullish impulsive wave sequence, labelled as 7/ in place since 28 August 2017 low. Thus, the Index may now see the start of a corrective decline to retrace the advance from 28 August 2017 low with potential downside target at 20780/20230 (61.8%/76.4% Fibonacci retracement of the up move from 28 Aug 2017 low to today’s current intraday high) which also confluences with the major ascending channel support from 24 June 2016 low (see daily & 1 hour charts).
- The next significant short-term support rests at 22200/100 which is defined by the medium-term ascending channel support from 08 September 2017 low and the 61.8% Fibonacci retracement of the up move from 19 October 2017 low to today’s current intraday high.
Key Levels (1 to 3 days)
Intermediate resistance: 22960
Pivot (key resistance): 23070
Supports: 22425 & 22200/100
Next resistance: 23420/500 (Fibonacci projection cluster).
Therefore as long as the 23070 short-term pivotal resistance is not surpassed, the Index may shape a further potential decline towards the supports of 22425 follow by 22200/100 next in the first step.
However, a clearance above 23070 shall negate the bearish tone to see a push up to retest the 23420/500 level.
Charts are from City Index Advantage TraderPro
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