Nikkei 225 Technical Analysis: Consolidate under Strong Resistance

Talking Points:

• Nikkei 225 Strategy: Bulls adjust target as consolidation persists, range traders in waiting
• Momentum is poised for downturn, a reversal of the index may follow
• Strong resistance of 76.4% Fibonacci at 19,989.4 firmly caps the upside

The Nikkei 225 has formed a consolidation right under the 76.4% Fibonacci and resistance level at 19,989.4. Momentum is poised for a downturn, even as the index continues to test resistance on a 10th session.

On the downside, Nikkei 225 is now trading under support trend line (in blue), a consequence of its failure to break through at the top. This trend line is now void, we will hereafter remove it from our watch list.

Momentum signals display a clear downside bias and we may expect this consolidation to prolong or even turn into a downward reversal in near term. In such case, support level to watch out for is the 61.8% Fibonacci at 19.397.1.

Due to this turn of momentum, the bulls may consider adjusting their targets to weather a long consolidation. On the other hand, range traders may prepare to take advantage of lower moves within the range of 61.8% Fibo - 76.4% Fibo, or 19.397-19.989.

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