nikkei 225 further potential push up toward descending range topresistance 1820852016

Daily Outlook, Tues 12 July 2016

(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has indeed rebounded as expected from its descending range bottom/support at 15100/200 as per highlighted in our previous daily short-term technical outlook/strategy reports last week. For this coming week, we are maintaining our bullish bias on the Index. Please click on this link to recap our latest weekly (medium-term) technical outlook/strategies for major stock indices published yesterday.

This current up move is also supported by potential fiscal expansionary plan that is likely worth 20 trillion yen to be announced as Prime Minister Abe’s ruling party’s collation won the upper house elections on Sunday.  In addition, the central bank, BOJ will meet on 28 to 29 July 2016 and it is likely that Governor Kuroda will announce more monetary stimulus polices, added by a meeting with former Fed Chairman Bernanke, a prominent of quantitative easing policies in Japan over lunch on Sunday. Details of the meeting are not disclosed as BOJ has not issued any statement on the substance of the lunch talks.

Key elements

• This morning’s price action of the Index has continued to surge upwards and it broke above  and staged retest on the upper boundary of the short-term ascending range now turns pull-back support at 16000 (depicted in dotted brown) (see 1 hour chart).
• The 4 hour RSI oscillator is overbought but without any bearish divergence signal yet. In addition, the shorter-term 1 hour Stochastic oscillator has just reversed up from its oversold region and still has room to manoeuvre to the upside before reaching an extreme overbought level.
• Based on the Elliot Wave Principal and fractal analysis, the Index is likely undergoing an intermediate degree bullish impulsive wave 3/ from last Friday, 08 July low of 15103 with its potential end target at 16670 (derived from Fibonacci clustering techniques) and it also confluences with the upper boundary of the descending range in place since 25 April 2016 (depicted in pink on the 4 hour chart).
• The key short-term support now rests at 15830 which is defined by the former minor swing highs area of 30 June/04 July 2016 and the 38.2% Fibonacci retracement from last Friday low of 15103 to current session’s intraday high.

Key levels (1 to 3 days)

Intermediate support: 16000

Pivot (key support): 15830

Resistance: 16670

Next support: 15400

Conclusion

Maintain bullish bias. As long as the 15830 daily short-term pivotal support holds, the Index is likely to see a further potential push up to target the 16670 resistance (upper boundary of descending range).

However, a break below the 15830 pivotal support may negate the preferred bullish tone for a slide to test the next support at 15400.

Disclaimer

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