nikkei 225 daily outlook for thurs 06 aug potential countertrend decline looms below 20850 969782015

(Click to enlarge chart)

What happened yesterday

The Japan 225 (proxy for the Nikkei 225) has managed to stage a rally and almost met the expected upside target at 20850 (printed a high of 20822 in the overnight session on 05 Aug 2015 @10pm).

Please click on this link for a review on our previous daily outlook.

Key elements

• Current price action has almost reached the upper of boundary of the ascending channel at 20850 which also recent swing highs of both June and July 2015 and the 76.4 Fibonacci projection from 27 July 2015 low @9pm to 03 August 2015 low @9am.
• The hourly RSI oscillator has just exited from its overbought level.
• Based on the Elliot Wave Principal, the Index is likely to have completed a bullish impulsive 5 wave structure of a lower degree from the 27 July 2015 low @9pm at the 20850 level. The next possible sequence will be a short-term bearish corrective structure to retrace the recent rally from the 27 July 2015 low @9pm.
• The lower boundary (support) of the ascending channel stands at 20550 which also coincides closely with the 38.2% Fibonacci retracement of the up move from 27 July 2015 low @9pm to the current 05 Aug 2015 high @10pm.

Key levels

Pivot (key resistance): 20850

Support: 20680 & 20550

Next resistance: 20960 & 21360/21400

Conclusion

Short-term technical elements are advocating for a potential countertrend decline below the 20850 daily pivotal resistance towards 20680 before targeting the 20550 support.

On the other hand, a clearance above the 20850 resistance is likely to invalidate the pull-back scenario for to see the continuation of the rally to target 20960 before the expected medium term target at 21360/21400 mentioned in our latest weekly outlook (click for more details).

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