nikkei 225 coming close to 16350300 risk zone for a potential relief rebound 1828232016

Daily Outlook, Friday 26 Aug 2016 (Click to enlarge chart) What happened earlier/yesterday The Japan 225 Index (proxy for the Nikkei 225) has indeed shaped […]

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By :  ,  Financial Analyst

Daily Outlook, Friday 26 Aug 2016

Japan Index (1 hour)_26 Aug 2016(Click to enlarge chart)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225) has indeed shaped the expected decline after the third failed bullish breakout attempt at the 16600 range top resistance.

The Index has plummeted by 0.8% in the opening in today’s Asian morning session to print a current intraday low of 16375 which is closed to our expected upper limit downside target/support zone of 16350/300.

Please click on this link for a recap on our previous daily short-term technical outlook/strategy.

Key Japan economic data/event as follow:

  • Jackson Hole Conference where BOJ governor Kuroda will take part in a panel discussion on Sat, 27 August 2016

Key elements

  • Based on the Elliot Wave Principal and fractal analysis, the corrective decline from the 16944 medium-term swing high seen on 12 August 2016 is likely to be considered as the first corrective downleg of an intermediate degree wave a/of a higher time frame primary degree corrective wave (2) that typically consists of a set of a/, b/ and c/ intermediate degree wave structures. The ongoing decline is the potential final 5th wave of a minor degree wave 5 to complete the intermediate degree corrective downleg wave a/ with projected end target at 16350/300.
  • Thereafter, a potential relief rebound (intermediate degree wave b/) is likely to occur with a potential end target at the 16660/740 zone which also confluences with the 16660 range top where the recent three attempts of failure bullish breakout occurred at the 16600 level follow by the minor swing high areas of 17/18 August 2016.
  • Momentum studies are also reinforcing the potential rebound scenario based on preferred Elliot Wave count/fractal analysis. The hourly (short-term) Stochastic oscillator is now coming close to an extreme oversold level which suggests limited downside potential as downside momentum of price action is overstretched at this juncture.

Key levels (1 to 3 days)

Intermediate support: 16350

Pivot (key support): 16300

Resistances: 16540 & 16660

Next support: 16000


Coming close to potential inflection zone, turn bullish for a relief rebound.  The Index may first see a “residual” dip towards 16350 and as long as the 16300 daily short-term pivotal support holds, it is likely to shape the a potential relief rebound to target the resistances at 16540 follow by 16660.

However, failure to hold above the 16300 short-term pivotal support may invalidate the preferred relief rebound scenario to see the continuation of the corrective decline towards the next support at 16000.


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