nikkei 225 maintain bearish stance for potential final push down before relief rally 1827922016

Daily Outlook, Wednesday 24 Aug 2016

(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225) has done a “stab” again at the predefined 16600 intermediate resistance (upper boundary of the short-term bullish “Descending Wedge”) as it printed an intraday high of 16663 before it gave up its gains as expected.

A clear sign of hesitation by the bulls, please click on this link for a recap on our previous daily short-term technical outlook/strategy.

Key elements

• In today’s morning Asian session, the Index has challenged the upper boundary of the “Descending Wedge” again but it does not have a clear breakout (printed a high of 16646 before it retraced back down).
• The hourly (short-term) Stochastic oscillator has just exited from its overbought region which suggests that the downside momentum of price action has resurfaced.
• We are still maintaining our preferred Elliot Wave count that the current expected down move is final 5^th wave of  the minute degree wave v to complete intermediate degree  wave 5 of a/ with potential end target at the 16350/300 zone (first leg of the potential corrective decline). Thereafter, a potential relief rally may occur to take it back up towards the 16740/16940 resistance zone.

Key levels (1 to 3 days)

Intermediate resistance: 16600/660

Pivot (key resistance): 16740

Support: 16350/300

Next resistance: 16940 (medium-term pivot)

Conclusion

Maintain bearish bias and consider this morning move as a whipsaw around 16600 intermediate resistance. As long as the 16740 daily short-term pivotal resistance is not surpassed, the Index is still in the process of  shaping the potential final push down to target the 16350/300 support (lower boundary of the Descending Wedge) to end the first leg of the potential corrective decline in place since 12 August 2016 high of 16944.

However, a clearance above the 16740 short-term pivotal resistance is likely to invalidate the preferred direct drop scenario for a squeeze up to test this week medium-term pivotal resistance of 16940.

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