Nikkei 225 Technical Notes:
- Nikkei 225 dropped more than 7.2% last week, largest correction in almost 2 years
- This decline conveniently paused on a long-term rising trend line from June 2016
- Immediate resistance stands around 22,227 while support seems to be about 21,013
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The Nikkei 225 declined more than 7.2 percent last week as aggressive risk aversion struck the markets. It was back in April 2016 that we witnessed such a remarkable correction just as large as this one, almost two years ago. As of Monday, the index pulled back from its late-September low of 20,543 from the prior week.
On a daily chart, the Nikkei 225 has been heading lower since the January 23rd high of 24,192. In the lead up to this correction, negative RSI divergence built up. Soon after, the index fell below a near-term rising support line that goes back to October 2017 (dotted blue line on the chart below).
From here, if prices continue climbing, the 38.2% Fibonacci retracement at 22,227 stands as immediate resistance. A push above that will expose the 23.6% level at 22,978. Interestingly, this price remained quite the stubborn resistance when Nikkei 225 was unable to push above it before the turn of the new year. Will it still hold again? We shall see.
A continuation of the correction on the other hand would place the 61.8% Fibonacci retracement at 21,013 as near-term support. A break below that will have the index facing the long-term rising trend line from June 2016. Speaking of that…
On a weekly chart, the Nikkei 225 seems to have paused its correction conveniently on the aforementioned rising line. If the index manages to break through this persistent floor and reverse the dominant trend, the 76.4% level at 20,261 might be the next target.