nikkei 225 daily outlook wed 13 jan 2016 bullish trend intact but risk of a minor pull back first wa

(Click to enlarge charts)

What happened yesterday

The Japan 225 (proxy for the Nikkei 225) has moved within our expectation as it drifted down close to the 17150 intermediate support before it traded higher in the European and U.S. sessions.

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

Key elements

• Earlier this morning, 13 January 2015, the Index has staged a bullish breakout from its former short-term descending channel with its upper boundary turns pull-back support at 17380 (in dotted green).
• The 17380 pull-back support of the descending channel breakout also confluences with a trendline support that has linked up the lows of  12January and 13 January 2016 @3am.
• Current price action is now coming close to our short-term upside target at 17840 which is defined by the minor swing high congestion area of 8 January 2016 from 9am to 8pm and the 1.618 Fibonacci projection from the recent minor up move from 12 January 2016 low @2pm to 12 January 2016 high @8pm projected from 13 January 2016 low @3am.
• The above mentioned 1.1618 Fibonacci projection taking into conjunction with the Elliot Wave Principal suggests that 17840 resistance is a likely standard bullish impulsive wave 3 target. Therefore, it is considered as a risk level for the bulls in the short-term as the price action may shape a pull-back for a corrective wave 4.
• The next resistance stands at 18140 which is also defined by the 50% Fibonacci retracement of the recent down move from 30 December 2015 high to 11 January 2016 low.
• The hourly (short-term) Stochastic is now flirting just below the extreme overbought level which highlights the risk of a potential short-term pull-back as well from a price momentum perspective.

Key levels (1 to 3 days)

Pivot (key support): 17380

Resistance: 17840 & 18140

Next support: 17100 & 16900

Conclusion

Maintain the bullish bias but do keep in mind of the risk of a minor pull-back below 17840. 17380 is the daily (short-term) pivotal support to maintain the current short-term bullish trend in the expected pull-back scenario for another potential upleg towards the next resistance at 18140.

However, failure to hold above the 17380 pivotal support may negate the bullish tone to see a slide to retest the 17100 support (minor swing low formed yesterday) and even the long-term key support at 16900.

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