nikkei 225 weekly outlook for 12 jan to 16 jan pull back before potential push up towards triangle r

What happened last week

The Japan 225 (proxy for the Nikkei 225) has challenged the weekly pivotal support at 16680 but held above it as expected. Please click on this link for more details on our previous write-up.

Key elements                                                        

• The Index continues to consolidate within  an impending “Symmetrical Triangle” configuration in place since 05 December 2014 high with upper and lower limits at 16680/16530 and 17700/17600 respectively (see daily chart).
• The pull-back support (in dotted blue) of the former complex range configuration breakout is also at 16680 (see daily chart).
• The 100-day Moving Average is supporting the Index at around 16680 (see daily chart).
• The intermediate term RSI oscillator is still holding above its trendline support (see daily char).
• Current price action is being capped below a short-term trendline resistance joining the highs since 02 January 2015 at 17130 (see 4 hour).
• The 17700/17600 upper limit of the impending “Symmetrical Triangle” also coincides with a Fibonacci cluster (see 4 hour chart).
• The short-term Stochastic has reached the overbought region which suggests the risk of a pull-back (see 4 hour chart).

Key levels (1 to 3 weeks)

Pivot (key support): 16680/16530

Resistance: 17130 & 17600/17700

Next support: 15600/15480

Conclusion

Based on the above mentioned elements, we are still in favour of a potential push up towards the upper limit of the “Symmetrical Triangle” at 17600/17700 as long as the weekly pivotal support at 16680/16530 holds.

However, do take note that there is likely a risk of a short-term pull back below the intermediate resistance at 17130 before the potential “push up” materialises.

On the other hand, a break below 16680/16530 is likely to invalidate the multi-month bullish trend to see a correction towards the next support at 15600/15480 in the first instance.

Disclaimer

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