nikkei 225 potential further push up towards major resistance zone 1845272017

Short-term Technical Outlook (Thurs, 02 Mar 2017)

(Click to enlarge chart)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has broken above the 19575 medium-term pivotal resistance in yesterday’s U.S session driven by a strong performance seen in the major U.S benchmark stock indices and a bullish tone seen in the USD/JPY.

Our medium-term bearish technical view on the Index has been invalidated.

Key technical elements

• The Index has staged a bullish breakout from the former descending trendline from 27 January 2017 high now turns pull-back support at 19500/450 which is also close to the 38.2% Fibonacci retracement from the recent steep up move from yesterday’s low of 19018 (see hourly chart).
• The hourly Stochastic oscillator has exited from the overbought zone and still has room to manoeuvre to the downside before it reaches an extreme oversold level. These observations suggest that the rally seen yesterday is overstretched and the Index is likely to see a pull-back at this juncture.
• The next resistance stands at the 19860/20000 major resistance zone (see daily chart).
• From an intermarket analysis perspective, the USD/JPY has breached above the 113.70 and now shows further upside potential test the next resistance at the 114.65/115.00 zone  in the short-term (descending trendline in place since 20 January 2017 swing high & the 50% Fibonacci retracement of the recent down move from significant 118.66 swing high printed on 15 December 2016.

Key levels (1 to 3 days)

Intermediate support: 19500/450

Pivot (key support): 19350

Resistance: 19860

Next support: 18990

Conclusion

Turn bullish in short-term but do expect a potential pull-back first towards 19500/450 intermediate support with a maximum limit set at the 19350 key short-term pivotal support before another potential upleg materialises to target the lower limit of the major resistance zone at 19860.

However, failure to hold above 19350 will indicate a failure bullish breakout and see a choppy downside move to retest the 18990 range support in place since 17 January 2017 low.

Charts are from City Index Advantage TraderPro

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