nikkei 225 daily outlook wed 27 jan 2016 minor pull back towards 16960800 before further potential u

(Click to enlarge chart)

What happened yesterday

The Japan 225 (proxy for the Nikkei 225 futures) has continued to decline throughout the Asian session and early European hours. It hit a low of 16540, just above our predetermined short-term pivotal support of 16540 before it staged the expected rebound and rallied all the way till the closing of the U.S. session.

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

Key elements

• The Index has rallied by 3.88% from yesterday low of 16540 to current Asian session high of 17245 which coming close to the minor swing high area of Monday, 25 January 2016 at 17290.
• The hourly (short-term) Stochastic oscillator has hit its extreme overbought level and flashed a bearish divergence signal which highlights the risk of a pull-back after strong gains seen in the overnight U.S. session.
• The intermediate support will be at 16960 follow by the more significant support at 16800 which is defined by the lower boundary of the a short-term bullish ascending channel in place since 21 January 2016 low and the 61.8% Fibonacci retracement of yesterday’s rally from 16540 low to the current high of 17245.
• The next significant resistance stands at 17740/840 zone (medium-term first upside target as per highlighted in our latest weekly outlook/strategy) and also now the 0.764/1.00 Fibonacci projection of 21 January 2016 low to 25 January 2015 high @7am projected from the 16540 low printed yesterday.

Key levels (1 to 3 days)

Intermediate support: 16960

Pivot (key support): 16800

Resistances: 17740/840

Next support: 16540/480

Conclusion

Due to the weakness seen in the hourly Stochastic oscillator (a momentum indicator), the Index may shaped a minor pull-back towards the intermediate support at 16960 with a maximum limit set at the tightened short-term pivotal support at 16800 before another potential upleg to target the next resistance at the 17740/840 zone.

On the flipside, failure to hold above the 16800 pivotal support is likely to negate the bullish tone to see a slide to rest yesterday’s swing of 16540 and even the medium-term pivotal support of 16480.

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