nikkei 225 daily outlook fri 12 feb potential final drop before countertrend movement sets in 179693

(Click to enlarge charts)

What happened yesterday

The Japan 225 (proxy for the Nikkei 225 futures) has continued to drop as expected and hit our expected pre-defined medium-term downside target at 15020 (click here for details).

Please click on this link for a recap on our previous daily outlook/strategy.

Key elements

• The medium-term downside target at 15020 has been fulfilled. Latest technical elements are suggesting that the Index is now coming close to an inflection zone of 14530/14450 where the Index may start to undergo a bullish countertrend movement after two weeks on steep decline.
• The inflection zone of 14530/14550 is defined by a confluence zone of elements. Firstly, it is the lower boundary of a longer-term descending channel in place 18 December 2015 (see daily chart). Secondly, it is also the lower boundary of the steeper descending channel in place since 01 February 2016. Thirdly, a Fibonacci projection cluster from various swing highs and lows can be found targeting the 14530/14450 zone.
• Based on the Elliot Wave Principle as per observed by the Fibonacci projection cluster mentioned above and channelling behaviour seen in the latest price action, the Index is likely to be undergoing the final 5^th wave of a bearish impulsive structure that started from 20 November 2015 high to complete the second set of a bearish five waves structure labelled as (C). Thereafter, a bullish countertrend movement is likely to occur at least on an intermediate degree (multi-week time frame) to retrace the down movement that started from 20 November 2015 high.
• The significant short-term resistance stands at 15480 as defined by the upper boundary of the steeper descending channel in place since 01 February 2016 (see hourly chart).

Key levels (1 to 3 days)

Pivot (key resistance):  15480

Support: 14530/14450

Next resistance: 16030

Conclusion

Based on the above mentioned elements, the Index is now coming close to a potential inflection zone of 14530/14550. Therefore, it will be prudent for us to place tight short-term pivotal resistance at 15480 for a final drop towards 14530/14450.

On the flipside, a clearance above 15480 is likely to negate the on-going bearish trend for a push up to test the next resistance at 16030.

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