nikkei 225 corrective rebound in progress before new potential downleg 1843192017

Short-term Technical Outlook (Wed, 01 Feb 2017)

(Click to enlarge chart)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has managed to shaped the expected corrective rebound within its medium-term downtrend as per highlighted in our weekly technical outlook report published yesterday (click here for a recap).

Key elements

• The on-going corrective rebound has been reinforced by the USD/JPY which has managed to hold above the 112.50 medium-term range support in place since 24 January 2016 swing low area. In addition, the U.S. S&P 500 has also managed to have a daily close above the intermediate support of 2277 which has kept the potential “last push up” scenario alive.
• The potential corrective rebound target for the Japan 225 Index stands at 19200/290 zone which is defined by a confluence of elements. The minor trendline resistance (in pink) from 27 January 2017 high and the 50&/61.8% Fibonacci retracement of the recent decline from 26 January 2017 high to yesterday’s U.S. session low of 18835.
• Based on the Elliot Wave Principal and fractal analysis, the decline from 26 January 2017 high of 19575 is likely the completion of a minor degree bearish impulsive wave, labelled as 1. Right now it is undergoing a minor degree corrective up move (dead cat bounce) to retrace the prior bearish impulsive wave before another potential bearish impulsive downleg materialises (wave 3).
• The hourly Stochastic oscillator continues to inch upwards towards an extreme overbought level which suggests that residual upside momentum of price action remains intact.

Key levels (1 to 3 days)

Intermediate resistance: 19200/290

Pivot (key resistance): 19400

Support: 18700/650

Next resistance: 19575 (medium-term pivot)

Conclusion

The Index may see a further minor push up (dead cat bounce) at this juncture towards 19200/290 with a maximum limit set at the 19400 short-term pivotal resistance before another potential downleg materialises to target the next support at 18700/650 (swing low area of 17 January 2017) in the first step.

However, a break above 19400 is likely to put the bears on hold to see a further squeeze up to test the 19575 medium-term pivotal resistance.

Charts are from City Index Advantage TraderPro

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