nikkei 225 short term pull back in progress watch 1600015830 support 1821022016

Daily Outlook, Wed 13 July 2016

(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has indeed staged the expected rally towards the descending range top and almost hit the target/resistance at 16670 (printed a high of 16579, a difference of only 0.55%).

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

Key elements

• The push up in price action has almost reached a significant short-term resistance at 16670 which is defined by a confluence of elements (the descending range top in place since 25 April 2016 high & a Fibonacci cluster).
• The 4 hour RSI oscillator has just exited from its overbought region and still has ample room to manoeuvre to the downside before reaching its support. These observations reinforce that the current rally is overextended and the Index will not to undergo a short-term pull-back phase.
• Based on the Elliot Wave Principal and fractal analysis, as per highlighted in yesterday’s short-term strategy, the Index is undergoing the intermediate degree bullish impulsive wave 3/ from last Friday, 08 July low of 15103. Yesterday’s price action has almost reached its projected target of 16670. Right now, it is staging a corrective (pull-back/consolidation) intermediate degree wave 4/ with expected end target at 16000/15830 zone.
• The aforementioned 16000/15830 support zone is defined by the 38.2%/50% Fibonacci retracement from 08 July 2016 low of 15103 to yesterday’s high, 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 1 hour chart).

Key levels (1 to 3 days)

Intermediate support: 16000

Pivot (key support): 15830

Resistances: 16670 & 17240

Next support: 15400

Conclusion

Short-term pull-back/consolidation in progress. The Index is now likely to see a further potential short-term decline towards 16000 intermediate support and even the 15830 key short-term pivotal support before another round of potential upleg materialises.

On the flipside, 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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