nikkei 225 weekly outlook 24 aug to 28 aug potential snap back below 1910019600 before further downs

(Click to enlarge charts)

Key elements

• Japan 225 (proxy for the Nikkei 225) has continued to tumble and registered a fall of 11% from its 20960 high seen on 24 June 2015. Current price action has shaped a bearish breakout from the neckline of the “Double Top” and pierced below the 200-day Moving Average (in orange) now turns pull-back resistance at 19500 (see daily chart).
• The exit potential of the bearish “Double Top” configuration stands at 18000 which corresponds with the 18300/18000 neckline support of the long-term bullish “Double Bottom” (formed since April 2003) breakout formation (see monthly & daily charts).
• The pull-back resistance of 19500 corresponds closely with the 50% Fibonacci retracement of the recent steep down move from 18 August 2015 high@12am to the current 24 August 2015 low @8am at 19600.
• Based on the Elliot Wave Principal, the Index appears to be forming a bearish a/, b/, c/ corrective “Flat” configuration. Current price action is in the midst of undergoing the c/ downleg which consists of 5 waves on a smaller degree. Interestingly, the expected price target of this corrective “Flat” stands at 18300 based on the 1.382 Fibonacci projection from 24 June 2015 high @8am to 11 August 2015 high @8am which confluences with the 18300/18000 neckline support of the long-term bullish “Double Bottom” breakout (see 4 hour chart).
• Short-term Stochastic oscillator has flashed a bullish divergence signal at its extreme oversold level. This observation suggests that the Index is likely to see a snap back in price action after its recent steep fall (see 4 hour chart).

Key levels (1 to 3 weeks)

Intermediate resistance: 19100

Pivot (key resistance): 19500/19600

Support: 18300/18000

Next resistance: 20850/20960

Conclusion

Technical elements are pointing for further downside in the Japan 225. However, do expect a potential short-term rebound at this juncture towards the intermediate resistance at 19100 with a maximum limit set at the 19500/19600 weekly pivotal resistance before another downside movement occurs to target the 18300/18000 long-term key support.

On the other hand, a break above the 19500/19600 pivotal resistance is likely to invalidate the bearish expectation for a further squeeze up to retest the June/July 2015 range top at 20850/20960.

Source:  Charts are from eSignal & City Index Advantage Trader

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