nikkei 225 short term corrective rebound target almost met risk of a new drop 2691152017

Short-term Technical Outlook (Thurs, 20 Apr 2017)

(Click to enlarge chart)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has continued its expected push up since the start of this week, 17 April.  From a technical analysis perspective as per highlighted in our latest weekly outlook, the on-going up move is likely to be a corrective rebound (dead cat bounce) and once the rebound is over, the Index should start to resume its on-going medium-term bearish down move in place since 14 March 2017 swing high.

Current price action is now fast approaching the lower limit of the corrective rebound target of 18580/640 where the today’s (20 April) Asian session current intraday high of 18524 is just 03% away from 18580. Click here for a recap on our previous short-term technical update.

Key technical elements

• Current price action of the Index is now right at the minor descending channel resistance in place since 20 April 2017.
• The key short-term resistance now stands at 18640 which is closed to the aforementioned descending channel resistance and the 38.2% Fibonacci retracement of the recent decline from 20 April 2017 high to 17 April 2017 low.
• The hourly Stochastic oscillator has reached its extreme overbought level and started to inch downwards. These observations suggest a potential bearish reversal in price action.
• The significant short-term supports rest at 18200 (17 April swing low) and 18060 (Fibonacci projection cluster).
• Based on intermarket analysis, the USD/JPY is also fast approaching the corrective rebound target of 109.70 where a potential downleg may materialise. Given its direct correlation with the Nikkei 225, any potential downside move in USD/JPY is likely to translate into a similar down move in the Nikkei 225.

Key levels (1 to 3 days)

Intermediate resistance: 18580

Pivot (key resistance): 18640

Supports: 18200 & 18060

Next resistance: 18850 (medium-term pivot)

Conclusion

The on-going rebound seen in the Index is now approaching an inflection zone where a potential new downleg may materialise. The Index may see a residual push up to test 18580 and as long as the 18640 short-term pivotal resistance is not surpassed, the Index is likely to see a potential bearish reversal to retest 18200 before targeting the next support at 18060 in the first step.

On the other hand, a clearance above 18640 may jeopardise the preferred bearish view for a squeeze up towards the 18850 medium-term pivotal resistance.

Charts are from City Index Advantage TraderPro

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