nikkei 225 potential dead cat bounce due for another round of downleg 1847752017

Short-term Technical Outlook (Tues, 28 Mar 2017)

(Click to enlarge chart)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) had met the first medium-term downside target at 18880 as expected (printed a low 18875) before it staged a recovery in yesterday’s European and U.S. sessions.

Please click on this link for a recap on our latest weekly technical outlook that was published earlier.

Despite yesterday’s rebound after it printed a low of 18875, current technical elements do not advocate the start of a medium-term (1 to 3 weeks) recovery at the juncture.

Key technical elements

• The Index remains capped below a minor descending trendline resistance from the 16 March 2017 minor swing high area at 19250.
• The key short-term resistance stands at 19300 which is defined by 24 March 2017 minor swing high and the 61.8% Fibonacci retracement of the decline from 16 March 2017 high to yesterday’s low of 18875.
• Based on intermarket analysis, the USD/JPY remains weak below its key short-term resistance of 111.00 after the bearish breakdown of its 110.70 minor range support seen yesterday. It still has the potential to stage another potential downleg to target the next short-term support at 109.40/30. Therefore, the Nikkei 225 is likely to see further downside pressure at this juncture.
• The support to watch for the Index now rests at 18700 (upper limit of the medium-term support zone of 18700/640 where a recovery can occur)

Key levels (1 to 3 days)

Intermediate resistance: 19250

Pivot (key resistance): 19300

Support: 18880 & 18700

Next resistance: 19400 (medium-term)

Conclusion

Maintain bearish bias and view the current rebound in place since yesterday’s European session as a potential “dead cat bounce”.

As long as the 19300 key short-term pivotal resistance is not surpassed, the Index is likely to see another potential downleg to retest 18880 before targeting the next support at 18700.

However, a break above 19300 may put bears on hold to see a residual push up to test the 19400 medium-term pivotal resistance.

Charts are from City Index Advantage TraderPro

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