nikkei 225 potential corrective rebound in progress 2685312017

Short-term Technical Outlook (Wed, 25 Jan 2017)

(Click to enlarge chart)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has managed to stage the expected rebound right at 18800/700 minor support zone as highlighted in our latest weekly technical outlook report published on this Monday, 23 January 2016 (click here for a recap).

The rationale for this anticipation is derived from intermarket analysis from USD/JPY and the potential impending bullish breakout on the S&P 500 (which took place yesterday).

Key elements

• Since the low of 18648 low printed on 18 January 2017, the Index has started to evolve into an ascending range channel with its lower boundary at 18860.
• Based on the Elliot Wave Principal and fractal analysis, the current up move is likely to be corrective in nature (dead cat bounce) before a potential medium-term down move materialises. The potential end target of this potential rebound stands at 19380/440 (derived from Fibonacci clustering technique) which also confluences closely with the upper boundary of aforementioned ascending range channel.
• The short-term hourly Stochastic oscillator still has some room left before it reaches an extreme oversold level. This observation suggests that price action of the Index may dip a bit more before it resumes another potential upleg of the on-going corrective rebound.

Key levels (1 to 3 days)

Intermediate support: 18930

Pivot (key support): 18860

Resistances: 19280 & 19380/440

Next support: 18650

Conclusion

The Index may see a further slide towards 18930 with a maximum limit set at the 18860 short-term pivotal support before a potential up move materialises to target the 20 January 2017 minor swing high area of 19280 before 19380/440.

On the other hand, failure to hold above 18860 may negate the preferred bullish tone to see a further slide to retest the 18 January 2017 swing low at 18650.

Charts are from City Index Advantage TraderPro

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