nikkei 225 weekly outlook 19 oct to 23 oct potential consolidationpull back above 1795017660 support

(Click to enlarge chart)

What happened last week

The Japan 225 (proxy for the Nikkei 225) has staged a whipsaw around the 17985 weekly pivotal support (printed a low of 17660 on 15 October 2015) before recovering towards the short-term range top at 18450.

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

Key elements

• Last week low of 17660 coincides with the 50% Fibonacci retracement of up move from the significant 29 September 2015 low to the 07 October 2015 high @12pm, the lower boundary of a short-term ascending channel (in dark blue) from 29 September 2015 low and the former swing high area at 01 October 2015 now turns support (see 4 hour chart).
• The lower boundary (support) of the ascending channel now stands at 17950 with its upper boundary (resistance) at 19190 that confluences with the 1.00 Fibonacci projection (minimum 3^rd wave target) from 29 September 2015 low to 07 October 2015 high @12pm projected from 15 October 2015 low @12am and the swing high 28 August 2015/ the former support joining the lows of 01 April 2015, 07 May 2015 and 09 July 2015 now turns pull-back resistance/200-day Moving Average (see daily & 4 hour charts).
• The daily (medium-term) RSI oscillator remains above its trendline support but is being capped by a descending resistance since March 2015 (see daily chart).
•  The 4 hour (short-term) Stochastic oscillator has just exited from its overbought region and still has room for further downside before reaching its oversold region. This observation suggests a risk of a pull-back in price action of the Index (see 4 hour chart).
• Based on the Elliot Wave Principal, the low of 17790 seen on 15 October 2015 is likely the low of the corrective (down) wave 2/ of a larger degree 5 wave bullish impulsive wave structure of 1/ ,2/, 3/, 4/ & 5/. In addition after taking account of the other aforementioned elements (RSI & Stochastic), the corrective wave 2/ appears not to have ended and may take the form of a triangle range configuration below the short-term range top of 18450 (see 4 hour chart).

Key levels (1 to 3 weeks)

Intermediate support: 17950

Pivot (key support): 17660

Resistance: 18450, 18740 & 19190

Next support: 16900/16660

Conclusion

The Index may now see a consolidation/pull-back below the 18450 short-term range top with support resting at 17950 (the lower boundary of the ascending channel). Thereafter, it is likely to resume its potential upside movement (the bullish impulsive wave 3/) towards the resistances of 18740 follow by 19190 next.

However, failure to hold above the 17660 weekly pivotal support is likely to invalidate the current bullish structure to see a decline to retest the 29 September 2015 low of 16900.

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