nikkei 225 poised for a potential bullish breakout 1821912016

(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has traded sideways below 16670 descending range top since last Thursday, 14 July 2016. However if we put all elements into perspective, the recent price action can be considered a consolidation for a potential bullish breakout rather than a toppish configuration.

Please click here for more details as per highlighted in our latest weekly/medium-term technical outlook/strategy published yesterday, 18 July 2016.

Key elements

• The short-term key support now rests at 16410 which is defined by the minor swing high area of 13 July 2016 @6pm SGT and the ascending trendline in place since 13 July 2016 swing low area @12pm SGT.
• The hourly short-term Stochastic oscillator has just inched up from its oversold region which highlights the revival of upside momentum of price action.
• The next resistance stands at 17100/240 which is defined by the minor swing high area of 31 May 2016 and a Fibonacci projection cluster.
• Based on intermarket analysis, the short-term technical elements of USD/JPY remains positive as it continues to evolve within a short-term ascending channel in place since the 13 July 2016 low of 104.16 with upside potential to test its upper boundary at 106.84. The 106.84 ascending channel’s resistance also confluences with the significant 23 June 2016 swing high (before Brexit) and a longer-term descending channel’s lower boundary in place since 29 January 2016 (the day when BOJ cut interest rate to negative).  Thus give the direct correlation between the movement of USD/JPY and Nikkei 225, the short-term positive elements seen in the USD/JPY should reinforce a potential bullish breakout for the Nikkei 225 above the 16670 descending range resistance.

Key levels (1 to 3 days)

Pivot (key support): 16410

Resistances: 16670 & 17100/240

Next support: 16200 & 15825 (medium-term pivot)

Conclusion

Poised for potential bullish breakout. As long as the 16410 daily short-term pivotal support holds, the Index is likely to see a potential bullish break above 16670 to open up scope for a further rally to target the next resistance at 17100/240 in the first step.

However, a break below the 16410 short-term pivotal support may negate the bullish tone to see a slide to retest the pull-back support of the former short-term ascending range’s upper boundary now at 16200.

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this email, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs. All queries regarding the contents of this material are to be directed to City Index, a trading name of GAIN Capital Singapore Pte Ltd.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.