Featured Trade: Bearish configuration sighted on Nikkei 225

Nikkei 225 has traced out a minor bearish reversal "Head & Shoulders" below 22840.

Short-term technical outlook on Japan 225 (Thurs, 02 Aug)

Key technical elements

  • Since hitting its 23020 medium-term range resistance on 12 Jun 2018, the Japan 225 Index (proxy for the Nikkei 225 futures) has traded it a wide sideways range of 6.5% between 23020 and 21460. The recent push up from its 22350 minor swing low of  31 Jul 2018 has managed to stall at a descending trendline in place since 12 Jun 2018 high now acting as a resistance at 22840 (see 4 hour chart)
  • From a shorter-term minor degree perspective, the Index has started to trace out a minor bearish reversal “Head & Shoulders” configuration right below the aforementioned descending trendline resistance with its neckline support at 22610 (see 1 hour chart)
  • Both the 4 and 1 hour Stochastic oscillators have continued to inch downwards and have not reached their respective extreme oversold levels. These observations suggest that short-term downside momentum of price action remains intact.
  • The next significant short-term support to watch will be at 22350 which is defined by the minor swing low areas of 23/31 Jul 2018 and the bearish exit potential of the minor “ Head & Shoulders”.

Key Levels (1 to 3 days)

Intermediate resistance: 22730

Pivot (key resistance): 22840

Supports: 22610 & 22350

Next resistance: 23020 (medium-term range top)


Therefore as long as the 22840 key short-term pivotal resistance is not surpassed and a break below 22610 is likely to reinforce the start of a potential bearish impulsive downleg to target the 22350 intermediate support in the first step.

 However, a clearance above 22840 negates the bearish tone for a squeeze up towards the 23020 medium-term range resistance.

Charts are from City Index Advantage TraderPro

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