Key Takeaways Last week, major stock indices have shaped the expected pull-back/consolidation and rallied sharply in the mid-week from their predefined supports. Nikkei 225 (15750/420), […]
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Intermediate support: 16000/15900
Pivot (key support): 15540
Resistances: 16500, 17100 & 17900
Next support: 14780/660
Last week, the Japan 225 (proxy for the Nikkei 225 futures) has pull-backed as expected below the predefined resistance zone of 16500/16900 and hit the expected upper limit of the downside target at 15750 (printed a low of 15540). Please click here for a recap on our previous weekly technical outlook/strategy.
Since the Index hit the expected pull-back downside target of 15750, it has managed to shape a reversal of 6.4% to hit a high of 16536 before it shaped a pull-back in last Friday, 26 February 2016 U.S. session.
Medium-term (daily) momentum indicator, the RSI oscillator has started to show signs of a built-up in upside momentum as it is now challenging its descending resistance with a prior bullish divergence signal seen at the oversold region. Based on the Elliot Wave Principal, it is likely that the pull-back/consolidation (wave b/) has ended at the last week low of 15540 and it is now unfolding the second phase of the countertrend rally (wave c/) of an intermediate degree (multi-weeks).
The intermediate resistance stands now at 16500 which is the upper boundary of a descending channel in place since 18 December 2015 follow by 17100 (1.00 Fibonacci projection of the first phase of countertrend rally from 12 February 2016 low to 18 February 2016 high projected from 24 February 2016 low of 15540) and 17900 next (1.618 Fibonacci projection of the first phase of countertrend rally from 12 February 2016 low to 18 February 2016 high projected from 24 February 2016 low of 15540 + 50% Fibonacci retracement of the broad decline from 24 June 2015 high of 20962 to 12 February 2016 low of 14782).
In addition from an intermarket analysis perspective, the USD/JPY which has a direct correlation with the price movement of the Nikkei 225 has started to show positive technical elements. As seen from the weekly chart, the USD/JPY has shaped a bullish candlestick pattern called “Bullish Morning Star” just above the 110.50 support coupled with a bullish divergence signal seen in the Stochastic oscillator which suggests a revival of upside momentum. These technical elements are suggesting at least a potential “relief rebound” for USD/JPY to test the 116.00/118.40 resistance zone.
Putting all these technical elements in perspective, we are now starting to see the potential start of the second phase of the countertrend rally for a bullish break above the 16500 intermediate resistance to open scope for a further upside movement to target 17100 follow by 17900 next.
Only a break below the 15540 medium-term pivotal support is likely to invalidate our bullish bias to see a decline to retest the 12 February 2016 swing low area of 14780/660.
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Intermediate support: 19130
Pivot (key support): 18680/540
Resistances: 19720, 20380 & 21000
Next support: 18060
The Hong Kong 50 Index (proxy for the Hang Seng Index futures) has pull-backed as expected below the 19720 resistance to hit a low of 18825 (slightly above of our medium-term downside target of 1868 as per highlighted in our previous weekly outlook/strategy).
Current technical elements have started to turn positive again which supports the start of the second phase of the potential countertrend rally. From last week low of 18825, the Index has rallied by 3.9% to print a high of 19576 on last Friday, 26 February 2016. Interestingly, the Index has traced out an impending bullish “Inverse Head & Shoulders” pattern (in shaded light blue boxes) in place since 21 January 2016 with its neckline resistance at 19720 and a potential bullish exit target of 21380 (close to the 21000 resistance which also coincides with the 1.382 Fibonacci projection of the rally from 11 February 2016 low to 22 February 2016 high of 19581 projected from last week low of 18825).
Any potential pull-back is likely to be held by the 19130 intermediate support and a break above the 19720 resistance is likely to kick start the second phase of the potential countertrend rally to target the 20380 resistance (close to the 61.8% Fibonacci retracement of the steep decline from 24 December 2015 high of 22306 to 11 February 2016 low of 18056 and the former swing low areas of 24 August 2015 and 29 September 2015). A break above 20380 is likely to open up scope for a further rally towards the next resistance at 21000 (close to bullish exit target of the “Inverse Head & Shoulders”).
On the other hand, failure to hold above the 18680/540 medium-term pivotal support is likely to invalidate the expected bullish breakout scenario to see a decline to retest the 11 February 2016 swing low area of 18060.
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Supports: 8770/8660 & 8400/8000
Resistances: 9340, 9590 & 9950
Last week, the China A50 Index (proxy for the FTSE China A50 futures) has shaped the expected decline right below the descending channel resistance of 9280/390 and plummeted to our downside target of 8930/8870 (printed a weekly low of 8694).
Technical elements are mixed at this juncture. On the positive side, we have the Index right back at the 8770/8660 support which is acting as a floor since 27 January 2016. In conjunction, the daily (medium-term) RSI oscillator has continued to hold above its ascending support but remains below its resistance.
On the negative side, the Index is still capped by the lower boundary of a bearish descending channel in place since 23 December 2015. Therefore, we have decided to adopt a neutral stance for this week between 9340 and 8770/8660 and wait for clearer elements to emerge.
A break below 8770/8660 is likely to trigger a further slide to test the key long-term support of 8400/8000.
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Intermediate support: 9340
Pivot (key support): 9120
Resistances: 9580, 9930 & 10280
Next support: 8700/8580
Last week, the German 30 Index (proxy for the DAX futures) has shaped the expected pull-back/consolidation right below the predefined resistance of 9650 and almost hit our downside target of 9100 (printed a weekly low of 9123) as per highlighted in our previous weekly outlook/strategy.
Technical elements have started to turn positive after the 5% rally seen from last week low of 9123. The daily (medium-term) RSI oscillator has started to show signs of a built-up in upside momentum as it is now challenging its descending resistance with a prior bullish divergence signal seen at the oversold region.
Based on the Elliot Wave Principal, the Index is likely to have seen the low of the pull-back/consolidation (wave b/) at 9120 and it is now unfolding a bullish five wave sequence (at least) labelled as wave c/ of an intermediate degree (multi-weeks) to kick start the start of the second phase of the countertrend rally.
The intermediate resistance now stands at 9580 which is the minor swing high areas of 04 February, 18 February, 22 February and 26 February 2015 follow by the significant medium resistance of 9930 (swing high of 27 January 2016 + 1.00 Fibonacci projection of the first phase countertrend rally from 11 February 2016 low to 22 February 2016 high projected from last week low of 9123 + upper boundary of the short-term ascending channel from 11 February 2016 low + pull-back resistance of the former long-term trendline support from September 2011 low).
Any potential pull-back in price action is likely to be held by the intermediate support of 9340 with a maximum limit set at the 9120 medium-term pivotal support before another potential upleg materializes to retest the 9580 intermediate resistance before targeting the 9930 level.
However, failure to hold above the 9120 medium-term pivotal support may invalidate our bullish bias to see a steeper decline to retest the 11 February 2016 swing low area of 8700/8580
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Intermediate support: 1939/30
Pivot (key support): 1900
Resistances: 1971, 1994 & 2030
Next support: 1874
Last Friday, the U.S. SP 500 Index (proxy for the S&P 500 futures) has shaped the expected drop below the 1947/54 intermediate resistance and hit our first downside target at 1900 (printed a weekly low of 1890).
Thereafter, it has rallied sharply by 4.3% and broke above the 1947/54 resistance (swing high areas of 13 January, 01 February and 22 February 2015) to hit a hit of 1971 seen last Friday, 26 February 2016. Technical elements have turned positive again which allows us to conclude that the low of pull-back/consolidation is likely to have ended at last week low of 1890 and now the Index is likely to be shaping the second phase of the countertrend rally.
Based on the Elliot Wave Principal, the Index is likely to have seen the low of the pull-back/consolidation (wave b/) at 1890 and it is now unfolding a bullish five wave sequence (at least) labelled as wave c/ of an intermediate degree (multi-weeks) to kick start the start of the second phase of the countertrend rally.
The significant resistances stand at 1994 which is defined by the former swing low of 14 December 2015 that was tested thrice, the 61.8% Fibonacci retracement of the steep decline from 02 December 2015 high to 11 February 2016 low and the 0.764 Fibonacci projection of the rally from 11 February 2016 low to 23 February 2016 high projected from last week low of 1890 follow by 2030 (Fibonacci projection of the rally from 11 February 2016 low to 23 February 2016 high projected from last week low of 1890, trendline line resistance from 02 December 2015 high + 76.4% Fibonacci retracement of the steep decline from 02 December 2015 high to 11 February 2016 low)
Momentum indicators are also positive. The daily (medium-term) RSI oscillator still has room for further potential upside before reaching its extreme overbought level. In addition, the 4 hour (short-term) Stochastic oscillator has dipped back to its extreme oversold level which suggests a potential reversal from last Friday’s pull-back in price action at/close to this juncture.
Any further potential pull-back back is likely to be held by the 1939/30 intermediate support before another round of upside movement materializes to target the next resistance at 1994 with a maximum limit set at 2030.
On the other hand, failure to hold above the 1900 medium-term pivotal support is likely to invalidate the bullish bias for the second phase of the countertrend rally to see a further slide to test the 1874 support. Only a break below 1874 may trigger a steeper decline to retest the critical 11 February 2016 swing low area of 1811.
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