nikkei 225 daily outlook fri 18 mar 2016 short term downside target at 16500 almost reached but elem

(Click to enlarge charts)

What happened yesterday/earlier

The Japan 225 (proxy for the Nikkei 225 futures) has managed to shape the expected decline from the 17300/180 pivotal resistance as per highlighted in our prior short-term daily outlook/strategy published on Thurs, 17 March 2016 (click here for a recap).

The Index has also did a bearish break below its first short-term support at 16870 and tumbled close to the expected short-term downside target set at 16500 (printed a low of 16567 in yesterday’s 17 March, European session).

Key elements

• Yesterday’s price action has reinforced our bearish medium-term view on the Index as we are expecting the end of the countertrend rally cycle in place since 12 February 2016 low of 14782. Click over here for more details as per highlighted in our latest weekly outlook/strategy). The Index has staged a bearish breakout from the lower boundary of the former ascending channel in place since the start of the countertrend rally cycle from 12 February 2016 low now turns pull-back resistance at 16940 and also the minor swing high of 18 March 2016 @7am
• The next short-term support to watch after 16500 will be at 16310 which is the former swing high areas of 17 March, 25 March and 26 March 2016.
• The hourly (short-term) Stochastic oscillator is now coming close to its extreme oversold level which highlights the risk of a rebound at the 16500 support level as short-term downside momentum in price action is getting “overstretched”.

Key levels (1 to 3 days)

Intermediate resistance: 16810

Pivot (key resistance): 16940

Supports: 16500 & 16310

Next resistance:  17180/300

Conclusion

The Index is now coming close to the expected short-term downside target at 16500 where it may see a short-term rebound towards the intermediate resistance at 16810.  Maintain bearish bias as long as the 16940 short-term pivotal resistance is not surpassed for another potential downleg to target the next support at 16310.

However, a break above the 16810 short-term pivotal resistance is likely to negate the bearish tone to see a push back up to retest the swing high areas of 15 and 17 March 2016 at 17180/300.

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