nikkei 225 daily outlook thurs 18 feb 2016 pull back has ended now further potential upside movement

(Click to enlarge charts)

What happened yesterday

The Japan 225 (proxy for the Nikkei 225 futures) has pull-backed as expected below the 16340/500 pre-defined resistance in the Asian session but it fall short of our expected downside target at 15420 (printed a low of 15628, a difference of 1.35%).

Thereafter, it reversed and continued its steady upward climb throughout the European and U.S. sessions. Please click on this link for a recap on our previous daily outlook/strategy.

Key elements

• Current price action is still below the intermediate resistance of 16500 but technical elements are not showing any signs of a potential pull-back or exhaustion at this juncture. 4 hour momentum indicators are still bullish as the RSI oscillator remains above its trendline support and the 50% level. In addition, it still has ample room before hitting the overbought zone. Even though, the more sensitive Stochastic oscillator has inched up towards the overbought region but it has not hit the extreme overbought level yet (red line) and no bearish divergence signal at the moment.
• Based on the Elliot Wave Principal, the price action from yesterday’s low of 15628 is likely to be the bottom of the corrective wave b as the rally seen from it has turned impulsive on a bullish nature as it has traced out five clear waves of a minute (short-term) degree of wave c.
• The next short-term significant resistance stands at 16890 which is defined by the upper boundary of the bearish descending channel in place since 18 December 2016 high, minor swing high area of 08 February 2016, close to the 1.00 Fibonacci projection of the length of bullish wave a from 12 February 2016 low projected from the low of the corrective wave b at yesterday’s low of 15628  and now the upper boundary of the short-term bullish ascending channel in place since 12 February 2016 low.
• The lower boundary of the short-term bullish ascending channel now rests at 16000.

Key levels (1 to 3 days)

Intermediate support: 16000

Pivot (key support): 15830

Resistances: 16500 & 16890

Next support: 14780

Conclusion

Technical elements are still positive and as long as the 16000/15830 support zone holds, the Index is likely to break 16500 and see further potential upside movement to target the next resistance at 16890.

On the other hand, a break below the 16000 short-term pivotal support may jeopardise the bullish force to see a decline to retest the 12 February 2016 swing low at 14780.

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