nikkei 225 perfect reaction below 16300 resistance maintain short term bearish bias 1817612016

Daily Outlook, Wed 22 June 2016

(Click to enlarge charts)

What happened earlier/yesterday

The recent rally seen in Japan 225 Index (proxy for the Nikkei 225 futures) has stalled perfectly as expected right below the predefined 16300 medium-term pivotal resistance in yesterday’s U.S. session (printed a high of 16293).

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

Key elements

• The Index has already declined by 1.8% from yesterday’s U.S. session high of 16293 to print a current intraday low of 15993 in today (22 June) Asian session.
• Current price action has reintegrated back below the pull-back resistance of the former minor “triangle range”’ support (depicted in dotted purple) which indicates a failure bullish break (bull trap) seen yesterday (see 4 hour chart).
• The minor support to watch now stands at 15990 (potential downside trigger level) which is defined by the short-term ascending trendline from last Thursday, 16 June low.
• The 1 hour (short-term) RSI oscillator has broken below its ascending trendline support that corresponds with the aforementioned short-term ascending trendline of the Index and prior to this bearish break, the RSI has also flashed a bearish divergence signal. In addition, the 4 hour Stochastic oscillator still has room to manoeuvre to the downside before reaching an extreme oversold level. These observations suggest that downside momentum of price action has resurfaced.

Key Levels (1 to 3 days)

Intermediate resistance: 16160

Pivot (key resistance): 16300

Supports: 15990 (trigger), 15510 & 15330/270

Next resistance: 16840

Conclusion

Maintain bearish bias. . As long as the 16300 medium-term pivotal resistance is not surpassed and a break below 15990 (potential trigger), the Index is likely to see a deeper slide to target 15510 and even last week swing low area of 15330/270 (also the swing low formed on 07 April 2016).

However, a clear break (daily close) above the 16300 pivotal resistance is likely to invalidate the preferred bearish bias to see a further squeeze up towards the next resistance at 16840 (minor swing high areas of 07/09 June 2016).

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