nikkei 225 weekly outlook 09 nov to 13 nov approaching 2005020190 risk zone for a potential multi we

(Click to enlarge charts)

What happened last week

The Japan 225 (proxy for the Nikkei 225) has staged a recovery just as expected right above the 18600/18400 key support zone. It has surpassed the first upside target at 19190 and printed a high of 19680 in today’s (09 November) morning session @10.30am (SGT). Based on the current price action, the Index is now fast approaching the lower limit of our expected target at 20050 (a difference of 1.89%).

Please click on this link for a review on our prior weekly technical strategy/outlook.

Key Economic Data Release/Events

• 09 Nov (Mon) – Bank Lending for Oct & Current Account/Trade Balance for Sep @2350 GMT
• 10 Nov (Tues) – Eco Watchers Survey for Oct @ 0500 GMT
• 11 Nov (Wed) – Foreign investment in Japan stocks for week ending Nov 6 @2350 GMT
• 13 Nov (Fri) – Industrial Production for Sep @0430 GMT

 Key elements

• The Index is now coming close to the upper limit (resistance) of a medium-term ascending channel (in dark blue) now at 20050. This observation suggests limited upside potential in price action (see daily & 4 hour charts).
• The ascending channel’s resistance at 20050 also confluences closely with exit potential of the “Inverse Head & Shoulders” bullish breakout stands at 20190 and a Fibonacci cluster (1.618 Fibonacci projection from 29 September 2015 low to 07 October 2015 high projected from 14 October 2015 low + 76.4% Fibonacci retracement of the steep down move from 10 August 2015 high to 29 September 2015 low + the standard 5^th wave target of 0.618 Fibonacci projection from 29 September 2015 low to 24 October 2015 high @12am projected from 02 November 2015 low @8am from a lower degree).
• Given the multiple confluence technical factors as per aforementioned, the 20050/200190 will be a significant resistance zone to watch.
• The daily (medium-term) RSI oscillator that gauges price momentum is now coming close to its extreme overbought level and the 4 hour (short-term) Stochastic oscillator has inched up into its overbought zone. These observations suggest that upside momentum is getting “overstretched” and the Index faces the risk of a price retracement to the downside.
•  Based on the Elliot Wave Principal, the Index is likely undergoing the final wave 5/ to complete the bullish impulsive wave (1) of a larger degree in place since 29 September 2015 low with expected target at 20050/20190. Thereafter, a corrective (bearish) wave 2/ is likely to occur to retrace the prior bullish movement.

Key levels (1 to 3 weeks)

Intermediate resistance: 20050

Pivot (key resistance): 20190

Support: 19190 & 18650

Next resistance: 20850/20960

Conclusion

The Index is now reaching a risk zone at 20050/20190 and technical elements are not in favour a further potential upside movement in terms of magnitude as seen in the prior two weeks.

As long as the 20190 medium-term pivotal resistance is not surpassed, the Index may now see the start of a multi-week pull-back towards 19190 before the 18650 support.

However, a clear break (daily close) above the 20190 pivotal resistance is likely to invalidate the multi-week pull-back/consolidation for a further push up towards the July/August 2015 range top at 20850/20960.

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