nikkei 225 daily outlook wed 21 oct back at 18450 short term range top 1627272015

(Click to enlarge chart)

What happened yesterday

The Japan 225 (proxy for the Nikkei 225) has traded sideways throughout the European and U.S. session. In today’s (21 October 2015) morning session, the Index has jumped by 1.14% to record a current high of 18393 despite a lacklustre export trade figure for September that has showed only a meagre year-on-year growth of 0.6% versus market expectation of 3.4%.

The rationale for this rally is likely build on a “hope” that the Bank of Japan (central bank) will have a rationale to implement more monetary easing in the next policy meeting on 30 October 2015 given such a weak economic data.

Please click on this link for a recap on our previous daily outlook.

Key elements

• Current price action is now resting just below its short-term range top in place since 07 October 2015 high at 18450.
• The hourly (short-term) Stochastic oscillator is now back at its extreme overbought level which suggests limited upside potential for the Index at this juncture.
• The supports to watch will be at 18150 (yesterday’s minor swing low congestion area) follow by the 17950 which is defined by the lower boundary of the ascending channel in place since 29 September 2015 low and a Fibonacci cluster (61.8% retracement from the recent up move from 15 October 2015 low @3am to 16 October 2015 high @9am and 0.618 projection taking the 07 October 2015 high @3pm to 15 October 2015 low @3am projected from 16 October 2015 high @9am).

Key levels (1 to 3 days)

Pivot (key resistance): 18450

Support: 18150 & 17950

Next resistance: 18740

Conclusion

As long as the daily (short-term) pivotal resistance at 18450 is not surpassed, the Index still faces the risk of a pull-back to retest 18150 and a break below it is likely to trigger a deeper slide towards the next support at 17950.

However, a clearance above the 18450 pivotal resistance may invalidate the push down scenario for a further rise to target the next resistance at 18740 in the first step.

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