nikkei 225 daily outlook wed 16 mar 2016 potential last push up scenario invalidated watch the 16870

(Click to enlarge chart)

What happened yesterday/earlier

The Japan 225 (proxy for the Nikkei 225 futures) has broken below the 17060 short-term pivotal support and invalidated our preferred “last push up” scenario towards the 17500/700 resistance.

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

Yesterday’s sell-off in the Index is being reinforced by a gloomier economic outlook on the state of the Japan economy as mentioned in the Bank of Japan (BOJ)’s press statement after its widely expected unchanged monetary policy.

Key elements

• Yesterday’s price action has increased the risk of the start of a steep decline to retrace the prior gains seen in countertrend rally that started from 12 February 2016 low of 14782. In addition, the daily (medium-term) RSI oscillator has flashed a bearish divergence signal which indicates a slow-down in upside momentum of price action.
• The “last line of defence” for the bulls now stands at 16870 which is the lower boundary (support) of the ascending channel in place since the start of the countertrend rally from 12 February 2016 low.
• The significant short-term resistance now stands at short-term range top of 17180/300 after yesterday’s failure bullish breakout from it.

Key levels (1 to 3 days)

Pivot (key resistance): 17180/300

Supports: 16870 & 16500

Next resistance: 17500/700

Conclusion

Technical elements have turned bearish to see a potential start of a steep decline to retrace the countertrend rally cycle that started from the 12 February 2016 low of 14782. As long as the 17180/300 pivotal resistance is not surpassed and a break below 16870 is likely to add impetus for a slide towards the next support at 16500 in the first step.

On the other hand, a clearance above the 17180/300 short-term pivotal resistance is likely to negate the expected bearish tone to see a “squeeze” up to target the 17500/700 resistance.

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