nikkei 225 daily outlook fri 05 feb 2016 still faces further downside pressure watch the 17000 resis

(Click to enlarge charts)

What happened earlier

The Japan 225 (proxy for the Nikkei 225 futures) has pushed up, reacted off the short-term resistance zone of 17230/490 and declined towards our expected short-term target at 1600.

The current price action of the index is now almost back to the level before the latest Bank of Japan’s monetary policy decision on negative interest rate on excess reserves announced on last Friday, 29 February 2016.  This implies more monetary easing policies have failed to reverse the current negative sentiment on the Index. We have warned earlier in our previous daily outlook/strategy that the mean reversion rally from the 21 January 2016 low is likely to be over (please click here for a review).

Key elements

• The Index is now evolving within a short-term bearish descending channel in place since 02 February 2016 high with its upper boundary (resistance) now at 17000.
• The lower boundary (support) of the descending channel rests at around the 16290/200 region which also confluences with a Fibonacci cluster (76.4% Fibonacci retracement of the rally from 21 January 2016 low to 01 February 2016 high + 0.764 projection of the down move from 01 February 2016 high to 04 February 2016 low @1am projected from 04 February 2016 high @12pm). For an Elliot Wave Principal perspective, this Fibonacci relationship suggests a potential “Triangle Range” configuration from the 21 January 2016 low.
• The hourly (short-term) Stochastic oscillator is turning down and still has further downside potential before reaching the extreme oversold level. This observation suggests that downside momentum remains intact on the Index.

Key levels (1 to 3 days)

Pivot (key resistance): 17000

Support: 16290/200

Next resistances: 17230/490

Conclusion

As long as the 17000 short-term pivotal resistance is not surpassed, the Index is likely to shape a further potential decline towards the 16290/200 support.

However, a break above 17000 may negate the bearish tone to see a push up to target the 17230/490 resistance zone.

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