nikkei 225 turning positive above 16000 support 1824732016

Daily Outlook, Thurs 04 Aug 2016

(Click to enlarge charts)

What happened earlier/yesterday

We have turned neutral in short-term due to the mixed elements presented in our previous daily short-term technical outlook/strategy. Yesterday, the Japan 225 Index (proxy for the Nikkei 225) has   futures)has challenged the lower limit of the neutrality zone at 16000 during the European session but it does not have an hourly close below 16000. This is a positive development in terms of price action.

Please click on this link for a recap on our previous daily short-term technical outlook/strategy.

Key elements

• Yesterday’s test on the 16000 support (as per defined by the short-term pull-back support, depicted in dotted dark blue from 21 July 2016 high & a Fibonacci cluster) has formed a “lower low” in price action. In conjunction, both the 4 and 1 hour Stochastic oscillators have formed a “higher low” instead which created a bullish divergence signal. These observations suggest that the downside momentum of the on-going decline in place since Monday, 01 August has started to wane and the price action of the Index is likely to shape at least a potential multi-day rebound at this juncture.
• The near-term resistance stands at 16320/400 which is defined by the former pull-back support of the short-term ascending range that is now acting as a resistance (as depicted in dotted green) and the former minor swing low areas of 27 July/30 July 2016. The next short-term resistance to watch will be at 16540 which is defined by the descending trendline (depicted in pink) in place since 21 July 2016 high and the 61.8% Fibonacci retracement of the current decline from 21 July 2016 high to this morning’s low of 15915.

Key levels (1 to 3 days)

Intermediate support: 16050

Pivot (key support): 16000

Resistances: 16320/400 & 16540

Next support: 15830

Conclusion

Turn bullish in short-term as elements have turned positive. As long as the 16000 daily short-term pivotal support holds, the Index is likely to shape a potential push up to test the near-term resistance at 16320/400 and a break above 16400 may open up scope for a further upside movement to target the next resistance at 16540.

However, a break below 16000 (hourly close) is likely to invalidate the preferred bullish bias for a further dip towards the next support at 15830.

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