nikkei 225 daily outlook fri 16 oct risk of pull backconsolidation before new rise above 1827018150

(Click to enlarge chart)

What happened yesterday

The Japan 225 (proxy for the Nikkei 225) has managed to break above 18100 upside trigger level and continued to surge upwards in the European/U.S. sessions.

This morning (16 October 2015), the Index has continued to push up in the first hour of trading when the cash market opened and almost met our first upside target (range-top in place since 07 October 2015 high) at 18440 (printed a current high of 18403).

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

Key elements

• In the shorter-term, the Index has started to evolve into an ascending channel (in dark blue as depicted in the hourly chart) in place since 15 October 2015 low @3am. The lower limit (support) of the ascending channel stands at 18150.
• The aforementioned ascending channel support at 18150 also coincides with the former pull-back resistance (in dotted green).
• The upper limit (resistance) of the ascending channel is at 18740 which also confluences with the swing high of 09 September 2015.
• Current price action is now right below the short-term range top in place since 07 October 2015 high at 18440. In conjunction, the daily (medium-term) RSI oscillator is now coming close to its trendline resistance and the hourly (short-term) Stochastic oscillator has reached its extreme overbought level. These observations suggest the risk of a pull-back/consolidation in price action of the Index at this juncture.

Key levels (1 to 3 days)

Intermediate support: 18270

Pivot (key support): 18150

Resistance: 18440 & 18740

Next support: 17700

Conclusion

Below 18440, the Index may see a pull-back/consolidation towards the 18270 intermediate support with a maximum limit set at the 18150 daily (short-term) pivotal support before another potential upleg materialises to target the next resistance at 18740.

However, a break below the 18150 short-term pivotal support is likely to damage the bullish tone for a deeper decline to test the next support at 17700 which is defined by the lower limit of a longer-term ascending channel (in orange) in place since 29 September 2015 low and the 15 October 2015 swing low.

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