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Nikkei 225 Technical Analysis: Are Japanese Stocks Setting Up to Fall?

Nikkei 225 Technical Analysis: Are Japanese Stocks Setting Up to Fall?

2020-05-20 04:00:00
Ilya Spivak, Head Strategist, APAC
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NIKKEI 225 Technical ANALYSIS – TALKING POINTS:

  • Nikkei 225 may be readying to resume downtrend after rebound
  • Upswing from March low forming bearish Rising Wedge pattern
  • Pivotal trend line, Fibonacci resistance just below 21000 eyed

Japanese stocks are perched at a defining technical barrier just below the 21000 figure. A violent selloff started in mid-February took out trend support set from December 2018, putting prices at a four-year low by late March. The subsequent upward reversal has brought the index back for a retest of support-turned-resistance, now reinforced by the 61.8% Fibonacci retracement at 20810.

How prices behave at this juncture is likely to establish whether gains scored over recent weeks represent trend change or merely a correction before the selloff resumes. The path of recovery has traced out a Rising Wedge chart formation, which typically carries bearish implications. Confirming as much calls for a daily close below the pattern’s lower bound, a barrier bolstered by the 50% Fib at 19815.

Establishing a foothold back above the 21000 figure may neutralize near-term selling pressure. Doing so looks likely to open the door for a rise toward a block of back-to-back resistance levels running from the 78.6% retracement at 22225 to the upper bound of former range support at 23090. If prices manage to work their way through that, the long-term top in the 24200-515 zone comes into view.

Nikkei 225 Technical Analysis: Are Japanese Stocks Setting Up to Fall?

Nikkei 225 daily chart created using TradingView

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--- Written by Ilya Spivak, Head APAC Strategist for DailyFX

To contact Ilya, use the Comments section below or @IlyaSpivak on Twitter

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

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