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Nikkei 225 Technical Analysis: Key Support Holds Firm Again

Nikkei 225 Technical Analysis: Key Support Holds Firm Again

David Cottle, Analyst


What's on this page

Nikkei 225 Technical Analysis Talking Points:

  • The Japanese stock benchmark is back to one-week highs
  • An important retracement level provided the base for this latest uptick
  • However overall risk appetite remains in control

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The Nikkei 225 has bounced this week at what looks like quite key support on its daily chart and, despite plentiful economic uncertainties, has powered back up to highs not seen for a week.

Nikkei 225 Chart (Daily)

That support zone comes in between the closing and intraday lows of October. It was traded out of once again pretty quickly to the upside this week.

Tellingly, it coincides with the second, 38.2% Fibonacci retracement of the rise up to this year’s highs from the lows of June, 2016 and it has held firm, just about, since the index topped it back in October 2017.

Nikkei 225 Chart (Daily)

It’s reasonable to assume that this region is keeping the index from rather deeper trouble, with this year’s low of 20372 in prospect if it breaks and, possibly, the next, 50% retracement level which comes in at 19632.

While that support holds, however, the bulls have at least a chance to build a base even if 2018’s highs don’t look reachable anytime soon. They will probably need to top the previous significant high quite shortly if the current modest revival is to gain pace. That was the 22765 level, hit at the start of December.

It might be best at this point to play for more upside for as long as that support zone holds on a daily closing basis, with a weekly close possibly even more encouraging. These are volatile times for global equity though, with overall risk appetite clearly able to trump technical factors at any given moment.

Disciplined use of stops is therefore essential.

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Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

--- Written by David Cottle, DailyFX Research

Follow David on Twitter @DavidCottleFX or use the Comments section below to get in touch!

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