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Nikkei 225 Stretched But Support Looks Firm. Overall Uptrend Holds

Nikkei 225 Stretched But Support Looks Firm. Overall Uptrend Holds

David Cottle, Analyst
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Nikkei 225 Technical Analysis Talking Points:

  • The Nikkei’s bullish impulse has waned a little in the last week or so
  • However, it still looks quite comfortable at current altitude, within striking distance of the year’s peaks
  • There’s good support even before we get to the first Fibonacci retracement of its current rise

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The Nikkei 225’s impressive climb up from the lows of late August shows some signs of exhaustion but the bulls can’t be written off yet.

The Tokyo stock benchmark has failed to make much progress since September 13 but, for all that, it remains within its dominant uptrend channel even if a test of the downside now looks far more likely than it did. It’s also worth bearing in mind that Japan has seen two market holidays in the past ten days which may have weakened activity somewhat.

Nikkei 225, Daily Chart

The channel base remains quite comfortably below the market, at 21,881 but of course it is far closer than the channel top which lies more than 600 points north at 22,750. A foray to that height would take the index well above its 2019 high. That may be a stretch even if global equity markets are cautiously optimistic on the two fundamental stories that have dominated 2019, those being US-China trade and central bank stimulus.

Still should that channel base give way, there’s probably moderate support at the current range base in the 21802 area.

However, the bulls will probably remain in overall control for at least as long as the market can stay above 21,689.3. That’s the first, 23.6% Fibonacci retracement of the rise up from those August lows.

If that can’t hold and the second retracement at 21,336.8 comes into view, then the bull thesis would be in more serious trouble, but that scenario doesn’t look very likely at this point. Expect nearby support to hold as long as overall risk appetite doesn’t suffer a serious blow.

Nikkei 225 Resources for Traders

Whether you are new to trading or an old hand DailyFX has plenty of resources to help you. There is 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 is 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.