nikkei 225 further potential short term decline below 18570 resistance 1839502016

Short-term Technical Outlook (Tues, 06 Dec 2016)

(Click to enlarge chart)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has hit our expected first downside target at 18280 as we have anticipated that the Index is likely to undergone a short-term pull-back/consolidation phase after a “final push” up towards 18700/800 resistance zone. Please click here for a recap on our reasons.

In our latest week technical outlook on the major stock indices published yesterday, 05 December 2016, we are still in favour that the on-going pull-back/consolidation still has not run its course and may see further downside before a the start of another potential upleg (please click here for a recap).

*Important note – the technical levels highlighted in the weekly technical outlook report are medium-term levels which will act as a top-down guide for our shorter-term (1 to 3 days) views.

Key elements

• Based on the Elliot Wave Principal and fractal analysis, yesterday’s rebound from the 18228 low can be considered as a corrective wave b of minute degree with potential end target at 18550 level (61.8% Fibonacci retracement of the recent decline from 01 December 2016 high of 18748. Interestingly, the rebound has managed to stall close to this level and also the 18570 minor swing high area of 01 December 2016 @11pm SGT before it staged a dip in yesterday’s U.S. session.
• The aforementioned element suggests that we should see potential start of the bearish impulsive minute degree wave c  to completer the minor degree corrective wave 4.
• The next minor support to watch will be at 18050 (close to the 18000 psychological level & the 1.00 Fibonacci projection from 01 December 2016 high of 18748).
• The hourly Stochastic oscillator has dipped into the oversold region which highlights the risk of a minor rebound towards the 18460 intermediate resistance.
• Intermarket analysis- USD/JPY remains below the 114.60/80 medium-term pivotal resistance.

Key levels (1 to 3 days)

Intermediate resistance: 18460

Pivot (key resistance): 18570

Supports: 18235 & 18050

Next resistance: 18800 (medium-term pivot)

Conclusion

Short-term bearish bias remains intact as the Index still has further potential down leg to complete the on-going pull-back/consolidation phase.

Risk of a minor rebound first but as long as the 18570 short-term pivotal resistance is not surpassed, the Index is likely to see another potential downleg to retest 18235 before targeting the next support at 18050.

However, a break above 18570 may negate the preferred bearish tone to see a squeeze up to test the 18800 medium-term pivotal resistance.

Charts are from City Index Advantage TraderPro

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