nikkei 225 daily outlook wed 13 apr 2016 short term upside target met coming close to potential bear

(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has staged the expected rally of the minor rebound and hit our short-term upside target at 16240/300 (printed a current high of 16354)

Please click on this link for a recap on our previous short-term daily outlook/strategy.

Key elements

• The Index is now fast approaching the upper limit (resistance) of the short-term ascending channel in place since 07 April 2016 low at 16455.
• The short-term ascending channel’s resistance at 16455 also confluences closely with a Fibonacci cluster (61.8% retracement of the recent down move from 28 March 2016 high of 17137 to 07 April 2016 low + 1.236 projection from 11 April 2016 low at 15521).
• Right above the 16455 level stands the significant medium-term resistance at 16590 (click here for more details in our latest weekly strategy/outlook).
• Short-term momentum indicators have started to flash out exhaustion signals. The hourly Stochastic oscillator has reached its extreme overbought level with a bearish divergence signal.
• In cross asset class reference, the recent rally seen USD/JPY from last Thursday, 07 April 2016 low is now coming close to a resistance at 109.00 which confluences with a set of technical elements (see last chart). Given that the past movements of the Nikkei 225 and USD/JPY are directly correlated and since both of them are now coming close/at parallel resistances, a potential bearish reaction is possible for the Nikkei 225 at this juncture.

Key levels (1 to 3 days)

Intermediate resistance: 16455

Pivot (key resistance): 16590 (weekly pivot)

Support: 15880/960

Next resistance: 16890

Conclusion

The Index may see a “residual” push up towards the 16455 intermediate resistance with a maximum limit set at the 16590 medium-term pivotal resistance before a potential bearish reaction occurs to target the 15880/960 support zone (lower limit of the short-term ascending channel + former minor swing high area of 08 April 2016.

However, a clear break above (daily close) the 16590 medium-term pivotal resistance is likely to invalidate our medium-term tactical bearish scenario for a push up to test the next resistance 16890 in the first step.

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.