nikkei 225 daily outlook tues 26 jan 2016 pull backed to supports for potential reversal 1794752016

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What happened yesterday

The Japan 225 (proxy for the Nikkei 225) has started to stage to retracement/pull-back in the U.S. session as per mentioned on our latest weekly outlook/strategy published yesterday (click here for details). This move was in line with a 9.35% decline seen in the WTI oil futures.

Key elements

• The Index has retraced and tested the pull-back support of the former “Expanding Wedge” bullish breakout at 16790/700 which also confluences with the 38.2% Fibonacci retracement of the recent up move 21 January 2016 low to yesterday high.
• Interestingly, the current price action is also hovering just above the 16480 medium-term pivotal support.
• The short-term hourly Stochastic oscillator has just exited from the oversold region which reinforces a potential recovery scenario to resume the mean reversion/ “snap-back” rally.
• The significant resistance stands at yesterday’s swing high at 17290 follow by 17740/840 (50% Fibonacci retracement from 18 December 2015 high to 21 January 2016 low & the 13 January 2016 swing high area).

Key levels (1 to 3 days)

Pivot (key support): 16480 (medium-term)

Resistances: 17290 & 17740/840

Next support: 16000

Conclusion

The Index has retraced/pull-back towards our predetermined support zones. As long as the 16480 pivotal support holds, the Index is likely to see a potential upturn to resume the mean reversion/ “snap-back rally” to retest the 17290 minor swing high in the first step with a maximum limit see at the 17740/840 zone.

However, failure to hold above the 16480 pivotal support may negate the bullish tone to see a further slide to retest the 16000 support.

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