nikkei 225 weekly outlook 12 oct to 16 oct bullish tone remains intact above 17985 support 242235201

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What happened last week

The Japan 225 (proxy for the Nikkei 225) has managed to stage a bullish breakout above the upper limit (resistance) of the bullish “Descending Wedge” chart pattern. This piece of price action has indicated a reversal in sentiment from bearish to bullish and invalidated the “last push down” scenario for a retest on the 29 September 2015 low of 16900.

Please click on this link for a review on our prior updated weekly outlook.

Key elements

• Since the bullish breakout of the “Descending Wedge”, the Index has started to evolve into a short-term ascending channel (in orange) from the 29 September 2015 low. The lower limit (support) of the ascending channel stands at 17985 which confluences with the minor swing lows of 07 October 2015 @8am and 08 October 2015 @12pm (see 4 hour chart)
• In terms of Fibonacci retracement, the low of the current consolidation in place since 06 October 2015 high has managed to stall at the 38.2% level from 02 October 2015 low @8pm to 06 October 2015.  Based on the Elliot Wave Principal, the current consolidation seen in price action is considered as the corrective wave 4/ of a five wave bullish impulsive structure from the 29 September 2015 low. The low of this corrective 4/ is likely to have completed at the 17985 level (low of 07 October 2015 @8am) aided by a positive reading seen on the 4-hour RSI oscillator that continues to hold above 50% level. The upside movement wave 5/ is likely to occur soon to complete the bullish five wave impulsive structure of (1) (see 4 hour chart).
• The daily (medium-term) RSI oscillator has broken above the 50% neutrality with a prior bullish divergence signal. Right now, it is attempting to break above (challenge) the its trendline resistance (see daily chart).
• The significant resistance on the medium-term stands at 19190 which is defined by the defined by the 200-day Moving Average, the former support joining the lows of 01 April 2015, 07 May 2015 and 09 July 2015 now turns pull-back resistance, the upper limit of the short-term ascending channel, 0.764 Fibonacci projection from 29 September 2015 low to the 07 October 2015 low @8am, a 5^th wave target of the expected wave 5/ based on the Elliot Wave Principal (see daily & 4 hour charts).

Key levels (1 to 3 weeks)

Pivot (key support): 17985

Resistance: 18740 & 19190

Next support: 17400 & 16900/16660

Conclusion

Current technical elements are still positive. Therefore, we have maintained our medium-term (1 to 3weeks) bullish expectation for the Index. As long as the 17985 weekly pivotal support (tightened from 17750) holds, the Index is likely to see another round of upside movement to target 18740 before the 19190 significant resistance.

On the other hand, a break below the 17985 pivotal support may invalidated the bullish scenario for slide to retest the pull-back support of the “Descending Wedge” bullish breakout at 17400 and even the 29 September 2015 low of 16900

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