nikkei 225 daily outlook thurs 28 apr 2016 post boj potential minor pull back below 1706017200 befor

(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has tested our short-term pivotal resistance at 17520 before Bank of Japan’s monetary policy announcement (printed a high of 17575) before it reversed down sharply post BOJ  and hit our expected short-term downside target at 16860/720.

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

Key elements

• Price action has tumbled straight towards the pull-back support (in dotted green as highlighted on the daily chart) of the range bullish breakout at 16720 aided by a disappointment from BOJ’s latest monetary policy that she will not add more monetary stimulus. Some market participants are expected further stimulus to counter the rise of a strengthening JPY and media reported last week that BOJ officials are looking at offering negative interest rate loans to banks to spur lending to consumers and corporations.
• The daily (medium-term) RSI oscillator, a measure of price momentum has broken its pull-back support (in dotted pink) and shows room for further potential downside towards the ascending support. These observations indicate a bearish pre-signal that downside momentum remains intact and the 16720 pull-back support of the Index may be taken out.
• The next significant support rests at 16250/16080 which is defined by a confluence of elements (swing low area of 17 April 2016  +Fibonacci cluster that consists of the 61.8% retracement of the up move from 07 April 2016 low to the recent 22 April 2016 high of 17772 and the 2.00/2.1618 projection of the recent down move from 22 April 2016 high).
• The key short-term resistance now stands at 17200 which is defined closely by the 61.8% Fibonacci retracement of the steep down move seen post BOJ to the current session low of 16538 and the pull-back resistance of the former minor swing lows area of 26/24 April 2016.

Key levels (1 to 3 days)

Intermediate resistance: 17060

Pivot (key resistance): 17200

Supports: 16720 & 16250/16080

Next resistance: 17575

Conclusion

The short-term bearish trend from the 22 April 2016 high remains intact. But the Index may see a potential minor rebound first above 16720 towards the short-term intermediate resistance at 17060 with a maximum limit set at the 17200 pivotal resistance before another down leg materialises to target the next support at 16250/16080.

However, a break above the 17200 short-term pivotal resistance is likely to negate the bearish tone to see a push up to test the current Asian session high of 17575.

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