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Talking Points
- Timing confluence coming up in the Nikkei
- Downtrend to reassert itself?
Nikkei 225 – Why Next Week Looks So Important For the Nikkei
Next week should prove important for the Nikkei 225. Several key timing relationships will be aligning then including the 61.8% retracement in time of the October 2014 – June 2015 advance, the measured move in time of last year’s June – September decline (as measured from the high in November) and the 61.8% retracement of the time between last year’s June and November highs. What makes this confluence of timing relationships particularly interesting is that two of the key swing points came from prior timing relationships as the low in September was the 38% retracement in time of the October 2014 – June 2015 advance and the high in November was the 61.8% time retracement. The market clearly seems to be respecting the symmetry at the moment.
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Heading into turn windows, I am usually looking to fade the prevailing short-term trend. In this case (assuming it continues for a few more days) that would suggest the index is vulnerable to putting in some sort of high next week. Using Fibonacci on price, an idealized zone of resistance looks to be between 16,700 and 16,780 as this marks a nice convergence of the 61.8% retracement of the February range and the 38% retracement of the November – February decline. Should we see aggressive strength into next week then the next level to watch for a potential adverse reaction would be in the 17,050 – 17,200 area. Of course, the curve ball to my thinking would be if the index turns down now and we get a decent decline into the turn window next week. In this case, I would be looking for a secondary low of some sort between 15,600 and the February low. This is not the favored scenario.
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--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter @KKerrFX
