nikkei 225 weekly outlook update 05 oct to 09 oct descending wedge breakout now pull back before pot

(Click to enlarge chart)

What happened earlier

The Japan 225 (proxy for the Nikkei 225) has staged a bullish breakout yesterday above the upper limit of the “Descending Wedge” chart configuration and the 18130 weekly pivotal resistance.

This latest price action has invalidated our initial “last push down” scenario and set the case for a potential start of a medium-term (1 to 3 weeks) of uptrend.

Please click on this link for a recap on our previous weekly outlook.

Key elements

• The Index has staged a bullish breakout above the upper limit of the “Descending Wedge” now turns pull-back support at 17750.
• The 1775 pull-back support also confluences closely with the 61.8% Fibonacci retracement of the most recent up move from 02 October 2015 low @8pm to the current high seen on 06 October 2015 @12am.
• The 4 hour (short-term) Stochastic oscillator has started to exit from its overbought level which suggests a potential pull-back in price action after a steep upmove seen yesterday.
• The significant resistance to watch in the medium-term will be at 19190 which is defined by the 200-day Moving Average, in orange and the former support joining the lows of 01 April 2015, 07 May 2015 and 09 July 2015 now turns pull-back resistance (click on this link for the details as per highlighted on the daily chart in the previous weekly outlook).

Key levels (1 to 3 weeks)

Pivot (key support): 17750

Resistance: 18740 & 19190

Next support: 17400 & 16900/16660

Conclusion

Latest price action has invalidated the initial expected “last push down” scenario. Right now, technical elements have started to show positive signals that indicate the start of a medium-term (1 to 3weeks) of uptrend. Given the steep up move seen yesterday, the Index may see a minor pull-back first, holding above the 17750 weekly pivotal support before another potential upside movement occurs to target 18740 before 19190.

However, failure to hold the 17750 pivotal support may see another choppy movement to retest the next support at 17400 and even last week low at 16900.

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