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Nikkei 225 Technical Analysis Talking Points:

  • The well-respected uptrend channel which has dominated this year endures
  • It seems to be in no danger of a downside test
  • Upside progress is likely to remain gradual but clear

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The Nikkei 225 has climbed back to highs not seen mid-December and has steadily reclaimed just over half of the sharp fall seen between the 2nd and the 24th of that month.

The bulls seem very much in control, still, with the Tokyo stock benchmark looking very comfortable in the upper reaches of a well-respected uptrend channel which has bounded trade since December 27.

The lower bound of that channel now comes in at 20,273. That’s more than 800 points below the market and, looking at current trading patterns, probably far enough away for investors to expect ample warning of any serious turnaround.

The next target for the bulls is a clear zone of resistance between 21,169 and 21,944. That was the trading range between December 4 and 17, and it contains the last significant peak, that of December 13 which marks the range top.

Chart of Nikkei 225 (Daily)

The index will need to break into that range and hold there before it can gird itself for a try at 22,779. That was the top of December 2. The index probably will manage to make such a break, but whether it can push on further, above the range, in the near-term seems more debatable.

Momentum is slowly creeping up towards overbought territory, even though it is not there yet. Given the strength of the current uptrend, a period of consolidation within this range could be quite a bullish signal of investor comfort at current levels.

It is worth pointing out however that while the technical factors look quite supportive of this index, overall risk appetite is likely to play a major role in what comes next, with US/China trade talk headlines probably driving events.

Resources for Traders

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

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