nikkei 225 potential short term pull back still in force below 16410 1821302016

Daily Outlook, Thurs 14 July 2016

(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has managed to stage a minor rebound from yesterday’s Asian session low of 16199 to hit a high of 16499 in the European session before it traded sideways.

Latest price action of the Index are still advocating for another potential downleg to complete the short-term pull-back/consolidation in place since the high of 16579 reached on 13 July 2016. More details as per highlighted below.

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

Key elements

• Yesterday’s minor rebound in price action from 16199 low to 16499 high has stalled right at the 76.4% Fibonacci retracement from 13 July 2016 high of 16579 to yesterday’s Asian session low of 16199. Based on the Elliot Wave Principal & fractal analysis, yesterday’s price movement from 16199 low is not considered as a bullish impulsive move and rather it is likely a sideways consolidation (a potential triangle formation of a minor degree) before another downleg materialises  to complete the intermediate wave 4/ at the 16000/15830 zone.
• With reference to the aforementioned minor degree triangle/consolidation formation, its range top stands at 16410.
• The 4 hour Stochastic oscillator still has some room left a potential downside movement before reaching the extreme oversold level. This observations reinforces the view of the current short-term pull-back in price action is still not over.
• The aforementioned 16000/15830 support zone is defined by the 38.2%/50% Fibonacci retracement from 08 July 2016 low of 15103 to 13 July 2016 high of 16579, the pull-back support of the bullish breakout of the former upper boundary of the short-term range (depicted in dotted brown and the former minor swing high areas of 30 June/04 July 2016) (see 4 & 1 hour charts).

Key levels (1 to 3 days)

Intermediate support: 16000

Pivot (key support): 15830

Resistances: 16410 & 16670

Next support: 15400

Conclusion

Short-term pull-back/consolidation is likely still in force. As long as the 16410 intermediate resistance is not surpassed, the Index may see another round of downleg to complete the short-term pull-back, wave 4/ to test the 16000 intermediate support with a maximum limit set at the 15830 daily pivotal support before another upleg materialises.

On the other hand, a break above the 16670 descending range top is likely  to open up scope for a further direct rise towards the next resistance at 17240 (medium-term target).

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