nikkei 225 daily outlook wed 13 apr 2016 short term upside target met coming close to potential bear

(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has staged the expected rally of the minor rebound and hit our short-term upside target at 16240/300 (printed a current high of 16354)

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

Key elements

• The Index is now fast approaching the upper limit (resistance) of the short-term ascending channel in place since 07 April 2016 low at 16455.
• The short-term ascending channel’s resistance at 16455 also confluences closely with a Fibonacci cluster (61.8% retracement of the recent down move from 28 March 2016 high of 17137 to 07 April 2016 low + 1.236 projection from 11 April 2016 low at 15521).
• Right above the 16455 level stands the significant medium-term resistance at 16590 (click here for more details in our latest weekly strategy/outlook).
• Short-term momentum indicators have started to flash out exhaustion signals. The hourly Stochastic oscillator has reached its extreme overbought level with a bearish divergence signal.
• In cross asset class reference, the recent rally seen USD/JPY from last Thursday, 07 April 2016 low is now coming close to a resistance at 109.00 which confluences with a set of technical elements (see last chart). Given that the past movements of the Nikkei 225 and USD/JPY are directly correlated and since both of them are now coming close/at parallel resistances, a potential bearish reaction is possible for the Nikkei 225 at this juncture.

Key levels (1 to 3 days)

Intermediate resistance: 16455

Pivot (key resistance): 16590 (weekly pivot)

Support: 15880/960

Next resistance: 16890

Conclusion

The Index may see a “residual” push up towards the 16455 intermediate resistance with a maximum limit set at the 16590 medium-term pivotal resistance before a potential bearish reaction occurs to target the 15880/960 support zone (lower limit of the short-term ascending channel + former minor swing high area of 08 April 2016.

However, a clear break above (daily close) the 16590 medium-term pivotal resistance is likely to invalidate our medium-term tactical bearish scenario for a push up to test the next resistance 16890 in the first step.

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