nikkei 225 downside momentum has started to wane 1854282017

Short-term Technical Outlook (Fri, 16 Jun 2017)

(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) had continued to drift lower since the start of this week, 12 June 2017. Yesterday (15 June), it had dipped lower in the European session and formed a new marginal low of 19738 which was just 0.7%  away from the 19600 medium-term pivotal support that we had highlighted in our latest weekly technical outlook report. Click here for a recap.

Key technical elements

• Yesterday’s decline was stalled at a Fibonacci cluster (1.00 Fibonacci projection of the decline from 02 June 2017 high to 06 June 2017 low projected from 09 June 2017 minor swing high & the 50% retracement of the previous up move from 18 May 2017 low to 02 June 2017 high) (see 1 hour chart).
• The daily RSI oscillator has retested and staged a rebound from its corresponding support at the 50% level. These observations suggest a revival of upside momentum of price action.
• The upper boundary of the short-term descending channel in place since 02 June 2017 is now acting as an intermediate resistance at 19970 (see 1 hour chart).
• The hourly Stochastic oscillator has reached its extreme overbought level which highlights the risk of a pull-back at this juncture.
• The key short-term support is now at 19740.

Key Levels (1 to 3 days)

Intermediate support: 19835

Pivot (key support): 19740

Resistances: 19970, 20100 & 20230

Next support: 19600 (medium-term pivot)

Conclusion

Yesterday price action of the Index and observations from momentum studies (the daily RSI oscillator) has suggested that the downside momentum of the on-going decline from 02 June 2017 high has started to ease and the Index may see a potential bullish breakout from its current decline.

However, a minor pull-back cannot be ruled out first towards the 19835 near-term support with a maximum limit set at the 19740 short-term pivotal support and a break above 19970 is likely to open up scope for a further potential rally towards 20100 before 20230 (02 June minor swing high area).

On the other hand, failure to hold above 19740 may put the preferred bullish bias on hold for a further corrective decline to test the 19600 medium-term pivotal support.

Charts are from City Index Advantage TraderPro

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