nikkei 225 16780 resistance to watch for a potential decline 1828592016

Daily Outlook, Tues 30 Aug 2016

(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225) has already managed to hit the expected “relief rally” upper limit target/resistance at 16740 (printed a high of 16780 in yesterday’s Asian session before it traded sideways).

Current technical elements are still in in favour of a potential second leg of the corrective decline on place since 12 August 2016 high. Please click on this link for a recap on our latest weekly technical outlook/strategy that has been published yesterday.

Key elements

• The recent rally from 26 August 2016 low of 16340 has continued to stall at the 16740/780 resistance that is defined by a confluence of elements. The minor  swing high area of 17/18 August 2016, the pull-back resistance in place since the minor swing low area of 16 August 2016 that has capped prior advances  (in dotted red) and the 76.4% Fibonacci retracement of the recent decline from 12 August 2016 high to 26 August 2016 low of 16340.
• The 4 hour Stochastic oscillator continues to inch downwards and still has further room to manoeuvre to the downside  before reaching an extreme oversold level. In addition, the shorter-term 1 hour Stochastic oscillator is approaching its extreme overbought level. These observations from momentum studies indicate limited upside potential in price action.
• Short-term supports rest at 16630 follow by 16500

Key levels (1 to 3 days)

Pivot (key resistance): 16780

Supports: 16630 & 16500

Next resistance: 16940 (medium-term pivot)

Conclusion

Turn bearish for potential second leg of corrective decline. As long as the 16780 daily short-term pivotal resistance is not surpassed, the Index is likely to shape a decline to target the supports at 16630 and 16500 in the first step.

However, a clearance above the 16780 short-term pivotal resistance is likely to negate the bearish tone to see a further squeeze up to test this week medium-term pivotal resistance of 16940.

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