nikkei 225 daily outlook wed 18 may 2016 back at 16720820 medium term pivotal resistance for a poten

(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has rallied by close to 1.2% in today, 18 May 2016 morning session due to a better than expected Japan Q1 GDP of 1.7% y/y versus a consensus of 0.2% y/y. Based on last quarter Q4 2015 revised reading of -1.7%, Japan has managed to doge a technical recession for now.

Interestingly, the rally seen in the Index has hit our predefined weekly pivotal resistance at 16720/820. Click here for more details as per highlighted in our latest weekly technical outlook/strategy published earlier.

Key elements

• The Index is now reacting off at its minor range top (resistance) at 16720/820 in place since 11 May 2016 high.
• The hourly (short-term) Stochastic oscillator is now coming close to an extreme overbought level which suggests limited upside potential in terms of price action at this juncture.
• The first near-term support to watch will be at 16510 which is minor swing lows area seen in the morning sessions of yesterday (17 May) and today (18 May) follow by 16200 next (pull-back support of the former minor rectangle/consolidation configuration bullish breakout that occurred on 09 May 2016).

Key levels (1 to 3 days)

Pivot (key resistance): 16720/820

Support: 16510 & 16200

Next resistance: 17240

Conclusion

As long as the 16720/820 pivotal resistance is not surpassed, the Index is likely to shape a push down to target 16510 before the range support at 16200.

On the other hand, a clearance above the 16720/820 medium-term pivotal resistance is likely to invalidate the medium-term bearish view for a further push up target the next resistance at 17240.

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