nikkei 225 daily outlook wed 06 jan 2016 potential short squeeze above 1810018000 support 1791772016

(Click to enlarge charts) What happened earlier The Japan 225 (proxy for the Nikkei 225) is now challenging the key medium-term support at 18100. Key […]

(Click to enlarge charts)

What happened earlier

The Japan 225 (proxy for the Nikkei 225) is now challenging the key medium-term support at 18100.

Key elements

The Index is now challenging its key medium-term support at 18100 which is a Fibonacci cluster and the trendline support that has linked up the higher lows since 14 October 2012.
In conjunction, the daily (medium-term) RSI oscillator is now testing its trendline support at the oversold region.
The hourly (short-term) Stochastic oscillator has dipped back into its oversold region which also suggests that the current downside momentum appears to be overstretched.
The intermediate resistance stands at 18550 which was yesterday’s minor swing high.

Key levels (1 to 3 days)

Pivot (key support): 18100/18000 (excess)

Resistance: 18550

Next support: 17500

Conclusion

After taking a closer look at the technical elements and intermarket analysis (USDJPY is now trading close to its range support in place since August 2015 at 118.00), we have considered this morning plunge in the Index as a “whipsaw” around the key 18100 medium-term support and maintain our preferred bullish scenario.

Excess have been tolerated to 18000 for a potential recovery to retest the 18550 minor swing high. However, a break below 18000 is likely to invalidate the recovery for further decline to target the next support at 17500.

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