ASX 200, NIKKEI 225 - Technical Outlook:
- A Double Bottom pattern seems to be present in the ASX 200 index
- The Nikkei 225 has rebounded from crucial support
- What are the key levels to watch if this week’s rebound continues?
ASX 200 SHORT-TERM TECHNICAL OUTLOOK - NEUTRAL
There are tentative signs emerging that Australia’s ASX 200 index may have found an interim floor, pointing to a broader range with an upward bias in the short term.
The index’s break on Tuesday above key resistance at the September 29 high of 6595 triggered a minor Double Bottom (the end-September and Monday’s lows), opening the way towards the late-September high of 6824. This follows a hold earlier this week above strong support at the June low of 6407. Put together, this suggests Australia’s benchmark index, at the very least, continues to remain in a range, albeit a broad one. The top of the range is defined by the August high of 7138, roughly coinciding with the 200-day moving average (now at about 7068).
ASX 200 Index Hourly Chart
Chart Created Using TradingView
In the very near term, say over the next couple of days or so, overbought conditions on intraday charts indicate that the index could retreat a bit. As the chart shows, the index is testing stiff converged resistance at 6824, coinciding with the top end of a rising channel from the end of September. Still, any retreat could be limited/short lived given positive momentum divergence on the weekly chart at Monday’s low (Double Bottom in the index associated with ascending 14-week Relative Strength Index), and around strong support on the 200-week moving average.
Any retreat could find initial support at the early-September low of 6715, around today’s low of 6700. Stronger support is at 6595. On the upside, the ASX 200 index needs to break above key resistance on the 200-day moving average (now at 7068) for the broader downward pressure to ease.
NIKKEI 225 SHORT-TERM TECHNICAL OUTLOOK - NEUTRAL
Japan’s Nikkei 225 index’s sharp rebound in recent days reasserts a range-bound view in the short term. The index has held above fairly strong converged support on the lower edge of a rising channel from March, not too far from the June low of 27030. The upper edge of the channel is a rising trendline from late March (now at about 29620).
Nikkei 225 Index Weekly Chart
Chart Created Using TradingView
Within the channel, the index is trading in the lower end, indicating that it is ascending in a ‘lower gear’. Japan’s benchmark index needs to break above the middle edge of the channel (now at about 28000) for the upward momentum to improve. Stronger resistance is at the August high of 29222. Any break above 29222 would be a strong signal that the index had resumed its broader uptrend.
From a big-picture perspective, despite the broad weakness across its peers, the Nikkei 225 index in March managed to hold above critical horizontal trendline support at about 24380. This suggests that the broader trend remains up following the bullish break in November 2020.
--- Written by Manish Jaradi, Strategist for DailyFX.com
