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JPN 225 Technical Analysis: The Rebound Builds Momentum

JPN 225 Technical Analysis: The Rebound Builds Momentum

Nathalie Huynh, Contributor

Talking Points:

  • Nikkei Strategy: Initial target at 10-day MA, to be adjusted as the rebound strengthens
  • Immediate resistance are the moving averages, then neckline of head-and-shoulders
  • Previous low at 17,098 supports the downside, unless momentum changes

An upward reversal has materialised in Nikkei index as it rose well above a previous low at 17,098. This is driven by an upturn in momentum, though too early for a confirmation in trend signals. Therefore traders should be mindful of support levels.

After a break of 5-day moving average, the index is heading up to 10-day moving average at 17,965. Above that come two resistance levels: 20-day moving average at 18,456 then the neck line of head-and-shoulders at 18,633. Upside movement dominates price action at this early stage, similar to a reversal in December.

Investors with long positions could look for initial target around 10-day MA, to be adjusted higher if the level is threatened. In absence of trend signal, there is risk that the rebound may transform into a consolidation. A previous daily low at 17,098 provides an immediate support level.

Daily Chart - Created Using FXCM Marketscope

Losing Money Trading Forex? This Might Be Why.

--- Written by Nathalie Huynh, Strategist for

Contact and follow Nathalie on Twitter: @nathuynh

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.