NIKKEI 225 TALKING POINTS:

  • The Nikkei is still heading higher, probably
  • But momentum could be fizzling
  • Bulls need to retake the last significant peak to carry on convincingly

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The Nikkei 225 remains in a well-respected uptrend but could be in danger of a downside break, even if it turns out to be consolidative in natire.

The current uptrend channel has endured since March 28 and is itself an extension of the rise which began a few days before, on March 23.

Nikkei 225 Technical Analysis: Bulls Must Retake Late Feb Peak

CHANNEL NEEDS AN UPSIDE TEST

However, it is clear that the channel has not faced much in the way of an upside test for most of its admittedly short existence. The last one came on April 5 as part of a trading session which saw a broad daily range but much less difference between the open and the close. This sort of day can mark a period of indecision by the market and, if that is the case here, then the verdict was overwhelmingly bullish. The index has rising consistently since.

That said it has as yet failed to match its previous significant high. That was the 22496 peak scaled albeit briefly on February 27. It’s not so very far away from current market levels but, with the index showing some signs of exhaustion it’s far from certain that the bulls have what it takes to get it there and keep it there.

They’ll probably have to if they’re going to consolidate at a higher level for a crack at the year’s 26-year peaks of January. It’s clear that the index retains some bullish momentum, but it’s equally clear that that momentum isn’t yet anywhere near enough to take it back to those highs.

KEEP AN EYE ON FEBRUARY’S HIGH

So watch that first, February peak closely. If the index can retake it and consolidate near it in the next week or so then another push higher, could be on the cards, albeit one that I’d be wary of chasing too far.

If it can’t, then look for support at 21614. That’s a 50% Fibonacci retracement of the rise from last August’s lows to the highs of January. Below that lies 61.8% retracement at 21007 and 76.4% retracement at 20225. That latter level is significant as it has so far held, unlike all those above it.

RESOURCES FOR NIKKEI 225 TRADERS

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--- Written by David Cottle, DailyFX Research

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