nikkei 225 potential bearish reaction below 16100300 resistance 1817392016

Daily Outlook, Tues 21 June 2016

(Click to enlarge charts)

What happened earlier/yesterday

The earlier push up seen in the Japan 225 Index (proxy for the Nikkei 225 futures) has managed to stall right below the 16100 intermediate resistance in yesterday’s U.S. session.

Key elements

• The decline seen in today’s Asian session opening (21 June) has managed to stage a turnaround at the 15760 intermediate support which is defined by the minor swing high of 17 June 2016 and the short-term ascending trendline from 16 June 2016 low.
• Right above the 16100 intermediate resistance (pull-back resistance of the former minor “triangle range” support & minor swing highs of 14/16 June 2016) will be this week’s medium-term pivotal resistance of 16300 which is now also the short-term descending trendline from 31 May 2016 high (click here to recap our latest weekly technical outlook/strategy published yesterday).
• The 4 hour Stochastic oscillator has exited from its overbought region and still has room to manoeuvre to the downside before reaching an extreme oversold level. In addition, the shorter-term (1 hour) Stochastic oscillator has just reached an extreme overbought level. All these observations suggest that short-term downside momentum of price action has started to resurface.

Key Levels (1 to 3 days)

Intermediate resistance: 16100

Pivot (key resistance): 16300

Supports: 15760, 15510 & 15330/270

Next resistance: 16840

Conclusion

The on-going push up in price action is trading close to resistances and technical elements suggest at least a potential bearish reaction at this juncture. As long as the 16300 medium-term pivotal resistance is not surpassed, the Index is likely to see a drop to retest the near-term support at 15760 (trigger) and a break below it may add impetus for a deeper slide to target 15510 before last week swing low area of 15330/270 (also the swing low formed on 07 April 2016).

Only 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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