(Click to enlarge charts)
What happened earlier/yesterday
The Japan 225 Index (proxy for the Nikkei 225 futures) has continued to tumble post BOJ and fared worst that our expectation as it did not shape any pull-back. It fell straight towards our short-term downside target (support) at 16250/16080 (printed a low of 16124 in yesterday’s U.S. session). * Japan cash market is closed today for a public holiday.
Please click on this link for a recap on our previous short-term daily outlook/strategy.
Key elements
- The Index has clearly broke below the1 6720 pull-back support of the former bullish range bullish breakout and reintegrated back inside the range that was formed from 12 February 2016 low to 07 April 2016 low. Short to medium-term bearish implications.
- The significant short-term support now rests at the 15680/480 zone which confluences with the range ascending support from 12 February 2016 low, 07 April 2016 swing low and a Fibonacci cluster.
- The daily RSI oscillator remains bearish and still has room for further downside before reaching its trendline support. These observations suggest that downside momentum of price action remains intact (see daily chart).
- Based on the Elliot Wave Principal and fractal analysis, the Index is likely to be undergoing the potential final 5th wave, v to complete a potential minor degree five wave structure labelled as a/ that started from the 23 April 2016 high of 17772. The fifth wave, v target stands closely at 15680 (1.00 time of the length of wave i projected from the high of wave iv at 16607) which confluences with the range support zone of 15680/480 as highlighted on the daily chart (see hour chart).
- The hourly (short-term) Stochastic oscillator remains bearish and still has some room left to manoeuvre before reaching an extreme oversold level. These observations suggest that there is still residual downside momentum left for the Index to stage a potential final push down before a consolidation/rebound occurs.
- The key short-term resistance to watch now will be at 16340 which is today’s Asian session swing high that is similar to yesterday’s U.S session swing low area.
Key levels (1 to 3 days)
Intermediate resistance: 16150
Pivot (key resistance): 16340
Supports: 15880 & 15680/480
Next resistance: 16600/720
Conclusion
Short-term bearish trend remains intact but it is coming close to a potential completion before a consolidation/rebound sets in (see above mentioned elements – 4th & 5th points). As long as the 16340 short-term pivotal resistance is not surpassed, the Index is likely to shape a potential final short-term push down towards 15880 before targeting the 15680/480 range support.
On the flipside, failure to hold below the 16340 short-term pivotal resistance may negate the bearish tone to see a push back up towards the minor swing high area of 28 April 2016 at 16600/720
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