nikkei 225 daily outlook fri 13 may 2016 looking vulnerable below 16720810 medium term pivotal resis

(Click to enlarge charts)

What happened earlier/yesterday

Even though the Japan 225 Index (proxy for the Nikkei 225 futures) has squeezed up above the 16650 short-term pivotal resistance but it does not manage to stage any advance beyond our current medium-term pivotal resistance of 16720/810 (excess) set at the start of this week. Please click link to recap our current weekly outlook/strategy

Interestingly, in yesterday’s U.S. session and today’s early Asian session, the Index has tested the 16720/810 medium-term pivotal resistance again and staged a retreat from it.

Today key economic event:

1)      Bank of Japan Governor Kuroda Speech @0330 GMT where market participants are looking for clues on the path of future monetary policy and the rationale for not taking additional easing measures that triggered a sell-off in the local stock market and the USDJPY in the last BOJ monetary policy meeting.

Key elements

• The medium-term pivotal resistance of 16720/810 also now coincides with a short-term descending trendline from 23 April 2016 high that has stalled prior advances in price action thrice (see shaded pink boxes in 1 hour chart).
• Right below the 16720/810 medium-term pivotal resistance, the Index has formed a mini bearish “Toppish” configuration with its neckline support at 16400 (see 1 hour chart)
• The next near-term supports rests at 16200 (pull-back support of the recent minor rectangle range bullish breakout) follow by 15840 (the minor rectangle range bottom + potential exit target of the impending bearish breakout from the mini “Toppish” configuration + 2.00 Fibonacci projection of the distance of the down move from 11 May 2016 high of 16822 to 12 May 2016 low of 16368 – bearish wave 3 extension from the Elliot Wave Principal + ascending trendline from 12 February 2016 swing low) (see 1 hour chart).
• The daily (medium) RSI oscillator remains below its resistance which suggests that upside momentums being capped thus further advances in price action may be limited at this juncture.

Key levels (1 to 3 days)

Pivot (key resistance): 16720/810

Supports: 16400, 16200 & 15840

Next resistance: 17240

Conclusion

Maintain bearish bias within a range. As long as the 16720/810 weekly pivotal resistance is not surpassed, a break below the first minor support at 16400 is likely to trigger a potential downside movement to target 16200 before 15840.

However, a clearance above the 16720/810 medium-term pivotal resistance is likely to invalidate the medium-term bearish view for a further push up target the next resistance at 17240.

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