Featured Trade Recent rebound of Japan 225 at risk of downside reversal

Short-term technical outlook on Japan 225 (Wed 13 Mar)

Key technical elements

• The recent rebound of 3.50% from its 08 Mar 2019 low of 20836 on the Japan 225 Index (proxy for the Nikkei 225 futures) has reached a significant short-term inflection level at 21640 which is defined by the minor swing high area of 06 Mar 2019 that led to last week’s decline and a Fibonacci retracement/expansion cluster (the 76.4% retracement of the recent decline from 04 Mar 2019 high to 08 Mar 2019 low & the 2.00 expansion of this week’s rebound from 08 Mar 2019 low to 11 Mar 2019 high projected from 11 Mar 2019 low)
• The upside momentum of the on-going rebound from 08 Mar 2019 low has started to wane as the 4-hour Stochastic oscillator has exited from its overbought region coupled with a recent bearish divergence signal seen in the 1-hour Stochastic oscillator at its overbought region on 12 Mar 2019.
• The short-term downside trigger rests at 21320 which is defined by the former minor swing low areas of 21/28 Feb 2019 and close to the minor ascending trendline from 08 Mar 2019 low.
• The next significant near-term support rests at 21100 which is defined by the minor swing low of 11 Mar 2019 and the close to the 61.8% Fibonacci retracement of the current rebound from 08 Mar 2019 low to 12 Mar 2019 high.

Key Levels (1 to 3 days)

Intermediate resistance: 21490

Pivot (key resistance): 21640

Supports: 21320 (trigger), 21100 & 20900

Next resistance: 21880 (medium-term pivot)

Conclusion

If the 21490 key short-term pivotal resistance is not surpassed and a break with an hourly close below 21320 is likely to reinforce the start of another potential impulsive downleg to target the next near-term support at 21100. Below it exposes the 20900 medium-term downside trigger level.

However, a  clearance above 21490 sees a further squeeze up to test the 21880 key medium-term pivotal resistance set for this week (click here for a recap on our latest weekly technical outlook report).