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Nikkei 225 Technical Analysis: Bullish Hopes Battered But Alive

Nikkei 225 Technical Analysis: Bullish Hopes Battered But Alive

David Cottle, Analyst


Talking Points:

  • The Nikkei has risen nicely since September, but seems to have hit an impasse
  • The 19600 level seems beyond it; the bulls have failed there four times
  • However, there may yet be reason for hope

Like many of its global peers, Japan’s Nikkei 225 equity benchmark has been rising quite consistently since September 2016. However, it appears to have hit something of a barrier.

For the last four weeks, the index has failed repeatedly to get above the 19600 level for any length of time, despite repeated assaults on that summit. For times the bulls have tried, and four times they have failed.

Is this barrier becoming significant, or will it too fall in time?

Well, a look at the moving averages for the index might well suggest the latter. The shorter-term, 100-day average has been above the 200-day since they crossed over back in mid-December. That sort of cross is held to be a bullish signal, and so it proved. The Nikkei is not around 19,300. Back then it was at 18416 or so.

As you can see from the chart below the two moving averages continue to diverge, which suggests that the index could still have more upside to give. It has already given plenty since that bullish crossover but the two have diverged more sharply since, which might give the bulls reason to hope.

The Nikkei may need to overcome resistance at the 19584 level to convince investors that it has what it takes for another leg higher. Above that, the next level to conjure with will be resistance at 20,012. The Nikkei hasn’t been that high since last November.

That sort of level would also offer investors the considerable psychological support of seeing the index back above 20,000. However recent history suggests that it doesn’t stay up there for long.

Still sending bullish signals. Nikkei moving averages.

Chart compiled using TradingView

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--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

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