nikkei 225 daily outlook thurs 11 feb continuation of the drop below 15700 resistance 1796712016

(Click to enlarge charts)

What happened earlier

The Japan 225 (proxy for the Nikkei 225 futures) has continued to tumble as expected within our medium-term view (1 to 3 weeks) and broke below the 16000 psychological level. Please click on this link for a recap on our latest weekly outlook/strategy that was published last Sunday.

* Do note that the local Japan stock market is closed for a public holiday today.

Key elements

• The short-term downside movement from 01 February high of 17907 has been evolving within a descending channel with its upper boundary (resistance) now at 16030 which also confluences with the former swing low of 21 January 2016.
• The Index is now approaching our expected medium-term downside target at 15020 as per highlighted in our latest weekly outlook/strategy. The 15020 level is now also a Fibonacci projection cluster (1.618 + 0.618) from a lower degree taken from the high of 01 February 2016 and 10 February 2016 respectively.
• Based on the Elliot Wave Principal, it is now undergoing the bearish impulsive wave 3 with the Fibonacci projection cluster target at 15020 as per mentioned above.
• The hourly (short-term) Stochastic oscillator has reached its extreme oversold level which highlights the risk of a “relief rebound” is round the corner.

Key levels (1 to 3 days)

Pivot (key resistance): 15700

Support: 15020

Next resistances: 16030

Conclusion

Given that the Index is approaching our expected medium-term downside target at 15020 and oversold condition seen in the hourly Stochastic oscillator, we have decided to place a tight short-term pivotal resistance at 15700 to see a continuation of a potential drop towards 15020.

However, a break above the 15700 pivotal resistance is likely to put the bears on hold to see a relief rally towards the descending channel’s resistance at 16030.

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