The JPN225 (Nikkei) Index has been trading in has continually been offering ranging opportunities dating back to the low at 9,335 on March 28th of this year. Since this time the pair has tested support four times however has yet to break free from its sideways trajectory. Currently, the index is creating three week highs and testing our range resistance near 9,750.
Japanese stocks are highly correlated to the fundamentals of the US economy. As the 5th largest exporter in the world, Japan needs demand for goods to remain steady to maintain economic growth. Yesterday, the US Federal reserve forecasted slower growth in the US economy for the coming months. If this prediction holds true, there may be a predictable adverse affect for Japanese stocks.
Price Action
Taking price into a 4H chart, we can begin to see the range developing on the JPN225. Resistance is planted neatly near the 9,750 figure. Support is holding just below at the 9,330. Finding these levels allows us to trade ranging opportunities with clear entry levels and profit targets. Aggressive traders may also begin looking for a breakout above or below support and resistance, looking for trending chances to emerge.
Trading Opportunity
My preference is to sell the JPN225 against resistance near 9,750. I am looking to use a two lot method of trading. Lot one will be using a stop at 9,960 and taking profit at support at the 9,330 level giving us a clear 1:2 Risk/ Reward.
Lot two should be entered at the same time close to the 9,750 handle. This trade should be moved to break even when our first lot is taking profit. A limit then should be placed at our second target of 8,910 preparing for a breakout.
Walker England contributes to the Instructor Trading Tips articles. To receive more timely notifications on his reports, email instructor@dailyfx.com to be added to the distribution list.
