nikkei 225 short term pull back invalidated further potential push up after dip 1839672016

Short-term Technical Outlook (Thurs, 08 Dec 2016) (Click to enlarge charts) What happened earlier/yesterday The Japan 225 Index (proxy for the Nikkei 225 futures) has […]

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By :  ,  Financial Analyst

Short-term Technical Outlook (Thurs, 08 Dec 2016)


japan-index-1-hour_08-dec-2016(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has surged upward in yesterday’s U.S. session in line with the benchmark U.S. stock indices where both the Dow and the S&P 500 have made new record highs (the S&P 500 printed a fresh high of 2242).

Due to this euphoria, the short-term pivotal resistance of 18570 on Japan 225 Index has been surpassed where our bearish case for a short-term pull-back has been invalidated. Interestingly, yesterday’s U.S. session strong move seen in the Index is not being matched by the movement in the USD/JPY as the currency pair has continued to wobble and declined by the 114.00 psychological level (do note that our medium-term  bearish technical view on the USD/JPY is still in play, click here for a recap).

Most of time, the movement of the USD/JPY and Nikkei 225 are directly correlated and this time round (at least in the short-term), it seems that that the Nikkei 225 is now being influenced by the movement in the U.S. stock market by a greater degree over the USD/JPY.

 Key elements

  • The next resistance to watch will be at 18800 which is our medium-term pivotal resistance set for this week and also now the upper boundary of a short-term ascending channel in place since this Monday, 05 December 2016 low.
  • The short-term key pivotal support now rests at 18550 which is defined by the former minor swing high area of 05 December 2016, the lower boundary of the short-term ascending channel and 38.2% Fibonacci retracement of the recent up move from 06 December 2016 low of 18315 to yesterday’s U.S. session high.
  • The hourly Stochastic oscillator has started to inch down from its extreme overbought level which highlights the risk of minor pull-back in price action at this juncture.

Key levels (1 to 3 days)

Pivot (key support): 18550

Resistances: 18800 (medium-term pivot) & 18950

Next support: 18235


Technical elements have now turned bullish in the short-term.  Right now, any potential minor pull-back in price action is likely to be held above/at the 18550 short-term pivotal support for another potential push up to test the 18800 medium-term pivotal resistance.

However, a break below 18550 will invalidate the “push up” scenario to turn the table back to the bears to see another round of short-term decline to retest this Monday, 05 December swing low area at 18235.

Charts are from City Index Advantage TraderPro


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