nikkei 225 daily outlook tues 16 feb 2016 risk minor pull back below 16500600 1797332016

(Click to enlarge charts)

What happened earlier

The Japan 225 (proxy for the Nikkei 225 futures) has continued to push up in this morning session but it is now approaching an intermediate resistance of 16500/600 as per highlighted in our latest weekly outlook/strategy published yesterday (click here for details).

Key elements

• Current price action is now hovering just below the intermediate resistance zone of 16500/600 which is defined by the 0.618/0.764 Fibonacci projection of the up move from last Friday, 12 February 2016  low of 14782 to 15 February 216 high of 16162 @1pm projected from 15 February 2016 low of 15749 @4pm.
• The aforementioned Fibonacci projections are standard 5^th wave target levels based on the Elliot Wave Principal. These observations suggest that the Index is likely to have completed a bullish impulsive five waves structure of a “minor degree” (short-term) labelled as wave a. Coupled with the hourly Stochastic oscillator now approaching its extreme overbought level, the current up move has appeared to be overstretched and a potential retracement (drop) is likely to occur at this juncture to see the wave b with potential targets set at the 15750 and 15420 supports.
• Above 16500/16600 will be the lower boundary (resistance) of the descending channel in place since 18 December 2015 high now capping the Index at 16890.

Key levels (1 to 3 days)

Intermediate resistance: 16500/600

Pivot (key resistance):  16890

Supports: 15750 & 15420

Next resistance: 17900

Conclusion

The Index may see a further push up towards the 16500/600 resistance and as long as the short-term pivotal resistance at 16890 is not surpassed, the Index faces the risk of a minor drop towards the 15750 support with a maximum limit set at 15420.

On the other hand, a clearance above the 16890 short-term pivotal resistance is likely to see an extension of the on-going rally towards the next resistance at 17900 (swing high zone of 01/02 February 2016).

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