nikkei 225 minor pull back has completed potential up move resumes above 16655 support 1825762016

Daily Outlook, Wednesday 10 Aug 2016

(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225) has indeed again moved within our expectation since the “bear trap” that occurred at the 16200 support. Yesterday, the Index has shot up and hit the predefined intermediate resistance at 16780 before the close of the Japan cash market.

In our latest weekly technical outlook/strategy that has been published on Monday, 08 August, we have anticipated a minor pull-back/consolidation around the 16780 level and the Index played out exactly what we expected as it pull-backed by  0.75% to print a low of 16655 in today’s early morning Asian session, 10 August. Please click on this link to recap our latest weekly technical outlook/strategy published earlier.

Key elements

• The Index is now breaking above the intermediate-term resistance of 16780.
• Since the low of 15915 seen last week on 04 August 2016, the Index has started to evolve within a short-term bullish ascending channel (depicted in blue) with its lower boundary now acting as a support at 16655.
• The aforementioned ascending channel support of 16655 also confluences with the 23.6% Fibonacci retracement of the rally seen from 04 August 2016 low of 16160 on 10pm SGT to today’s current intraday high of 16827 (see 1 hour chart).
• The upper boundary (resistance) of the aforementioned ascending channel stands at 17200/240 which also confluences with a medium-term swing high area of 31 May 2016 and a Fibonacci cluster.
• Based on the Elliot Wave Principal and fractal analysis, the Index is likely to be undergoing an impulsive extended wave 3 of a minor degree with a larger degree (higher time frame) bullish impulsive wave structure/cycle. The potential projected wave 3 target is at the 17200/240 zone.
• The 4 hour Stochastic oscillator has started to inch back up towards its extreme overbought level which suggests that short-term upside momentum of price action remains intact.

Key levels (1 to 3 days)

Intermediate support: 16780

Pivot (key support): 16655

Resistances: 16930 & 17200/240

Next support: 16480

Conclusion

Potential upside movement resumes after yesterday’s minor pull-back. As long as the 16655 daily short-term pivotal support holds, the Index is likely to shape another upleg to target the next resistances at 16930 before 17200/240.

On the other hand, failure to hold above 16655 short-term pivotal support is likely to invalidate the preferred direct rise scenario for a deeper pull-back to test the next support at 16480 (the pull-back support of the former descending trendline bullish breakout – depicted in dotted pink on the 1 hour chart).

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