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Nikkei 225 Technical Analysis: Does Something Have To Give?

Nikkei 225 Technical Analysis: Does Something Have To Give?

David Cottle, Analyst


Talking Points:

  • The Tokyo stock benchmark looks a little shaky
  • It has just made another lower high and the year’s gains are now wafer thin
  • However, its range also looks quite solid. A ‘big moment’ may have to wait

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In one sense, it would be easy to say that some sort of crunch must be coming for the Nikkei 225.

The index is once again within a whisker of losing all its 2017 gains. If it falls to 19,232 – from its current 19,431 – then it will be back to where it started the year. Such a fall seems all-too likely as well, in the circumstances. I wondered in last week’s technical snapshot whether or not the index might be making a lower high from its last significant top.

Well, we now have our answer, and it’s a “yes”. August 31’s peak of 19,712 was indeed below the last one (August 15’s 19,820), and the year’s starting line is coming under pressure once more.

The index’s long slide from June’s 2017 peak remains in place and, indeed, it accelerated with a series of sharp, early-August falls. So surely the surrender of the year’s gains in total is only a matter of time.

Well, possibly. But it could be a matter of quite some time. Aside from all of the above the Nikkei has settled quite comfortably into a 400-point range which has contained all the action ever since August 11. It’s the gray box in the chart below. Although both the trend and the index’s moving averages look quite bearish, the range also looks solid. If yet another try at the 2017 start line fails it may just be best to assume that those 400 points are still all you have to play with.

--- 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.