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Short-term Technical Outlook (Tues, 09 May 2017)

(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) had continued to push up as expected after its bullish breakout from its former range top at 19700 that was in line with the expected rally seen in the USD/JPY.  The Index is now coming close to an intermediate resistance of 20000 (printed a high of 19935). Please click here for a recap on our latest weekly technical outlook report published yesterday.

Key technical elements

• The 20000 intermediate resistance is defined by exit potential of the former bullish “basing formation” from 12 February to 24 June 2016 that has been broken out on 14 November 2016 and the swing high area of 23 November 2015 (see daily chart chart).
• The significant short-term support now rests at 19700/600 which is defined by the former range top from 04 January 2017, the former descending trendline resistance from June 2015 high and the lower boundary of an ascending channel in place since 19 April 2017 low.
• Based on the intermarket analysis, in parallel the current rally seen in the USD/JPY has almost reached the 113.50 intermediate resistance (printed a current intraday high of 113.38 in today, 09 May Asian session) where its short-term technical elements advocate a potential short-term decline to test the supports at 112.45 and 112.15. Due to its direct correlation with the Nikkei 225, a decline in the UISD/JPY at this juncture is likely to cause a similar potential slide in the Nikkei 225.
• The hourly Stochastic oscillator of the Index has inched downwards and still has some room left to manoeuvre to the downside before it reaches an extreme oversold level. These observations suggest that short-term downside momentum of price action remains intact.

Key levels (1 to 3 days)

Intermediate resistance: 19900

Pivot (key resistance): 20000

Support: 19700/600

Next resistance: 20200

Conclusion

As long as the 20000 short-term pivotal resistance is not surpassed, the Index is likely to see a potential setback/decline to target the 19700/60 before another upleg materialises.

However, a clearance above 20000 may invalidate the preferred setback scenario to open up scope for a direct rise towards the next resistance at 20200.

Charts are from City Index Advantage TraderPro

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