nikkei 225 daily outlook wed 06 apr 2016 16070 key resistance to watch to maintain potential direct

(Click to enlarge chart)

What happened earlier/yesterday

The Japan 225 (proxy for the Nikkei 225 futures) has tumbled as expected and breached slightly below the lower limit of the first expected downside target of 15750/600 (printed a low of 15540 in yesterday’s European session) before minor rebound/consolidation occurred in the U.S. session.

This is the minor rebound/consolidation that we are expected after a steep decline seen in the Asian session which we have highlighted in our previous daily short-term outlook/strategy (please click here for a recap).

Key elements

• In this morning session, the Index has shaped a further pushed up from yesterday’s low of 15540 reinforced by a better China Caixin Services PMI figure for Mar which is at 52.2 versus a February reading of 51.2. The current rally is still being capped below by a bearish descending channel in place since the 31 March 2016 high which is acting as an immediate resistance at 15900.
• The current upper limit of the descending channel at 15900 also coincides closely with the 23.6% Fibonacci retracement from the high of 28 March 2016 to yesterday’s low of 15540.
• The key short-term resistance remains at 16070 which is the pull-back of the minor triangle range breakdown seen from 01 April 2016 low @1pm to 04 April 2016 high @11am.
• The hourly (short-term) Stochastic is oriented to the upside but it is coming close to its overbought region which suggests limited upside potential.

Key levels (1 to 3 days)

Pivot (key resistance): 16070

Supports: 15370

Next resistance:  16300

Conclusion

Despite this morning push up in price action, we are maintaining our bearish bias on the Index as the bearish trend remains intact without any clear signs of exhaustion yet.

As long  as the 16070 short-term pivotal support is not surpassed , the Index is likely to shape another potential downleg to target the maximum medium-term target set for this week at 15370 (a Fibonacci cluster).

On the other hand, a break above the 16070 short-term pivotal resistance is likely to negate the bearish tone to see a further push up/consolidation towards the next resistance at 16300.

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