nikkei 225 daily outlook wed 08 june 2016 corrective rally is likely to have ended downside movement

(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has indeed shaped the expected “snap-back” rally on Tues, 09 July 2016 and slightly surpassed the intermediate resistance at 16760 (printed a high of 16843 in yesterday’s European session) as per highlighted in our latest technical weekly outlook/strategy published on Monday (click here to recap).

Key elements

• The push up in price action from last Friday, 03 June 2016 low of 16260 has stalled right below the 16920/17015 medium-term pivotal resistance set for this week.
• Current price aciton has broken below a short-term ascending trendlline from 03 June 2016 and created a “failure bullish breakout” at the 16750 level. These observations have suggested that the rally from 03 June 2016 is likely to be corrective in nature (a snap-back rally) to retrace the previous down move from 31 May 2016 high of 17258 to 03 June 2016 low of 16260.  In conjunction with the Elliot Wave Principal, it is likely that this minor corrective rally cycle has ended its course and the Index is now undergoing a minor impulsive downside movement to complete the wave c of b/.
• The hourly (short-term) RSI oscillator is also supporting this short-term bearish expectation as it has just broken below the 50% neutrality level and still has room for further downside before reaching its oversold region. These observations suggest that downside momentum of price action has resurfaced.

Key levels (1 to 3 days)

Intermediate resistance: 16750

Pivot (key resistance): 16920/17015 (medium-term)

Supports: 16470 & 16300

Next resistance: 17250

Conclusion

As long as the 16920/17015 pivotal resistance is not surpassed, the Index is likely to see the start of another potential impulsive downside cycle to target the short-term supports at 16470 and 16300 (03 June 2016 swing low area) in the first step.

However, a break above the 16920/17015 pivotal resistance is likely to damage our medium-term bearish view for a further rally to retest the 31 May 2016 swing high area of 17250.

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this email, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs. All queries regarding the contents of this material are to be directed to City Index, a trading name of GAIN Capital Singapore Pte Ltd.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.