Talking Points:
- Nikkei 225 Strategy: Flexible stops/targets to protect on the downside
- Momentum builds up for a contest of lower bound and support level
- High volatility would follow a breach, next support is 50% Fibonacci at 18,918
Along with the rest of Asian stock indices, the Nikkei 225 descended near the lower bound of its current range 19,397-19,989 (61.8% to 76.45% Fibonacci). A clear downward momentum will likely retain it in this proximity, with modest chance for a breach of support.
This range, outlined by two Fibonacci levels, has trapped Nikkei’s movement since early November. However this is the first time that lower bound and support rises to attention, after persistent upward development. Lower moves or break of support are not ruled out until the session ends. Support level below that is 50% Fibonacci at 18,918.
Traders with long position may keep stop loss and target flexible in case there is a need to get out. Range traders who position for fluctuation within the range may find opportunities, as long as the lower bound withstands. Dip buying is also possible in the event of a break, however ensuing volatility triggered by stops being hit may counter profit potential.
Losing Money Trading Forex? This Might Be Why.
--- Written by Nathalie Huynh, Strategist for DailyFX.com
Contact and follow Nathalie on Twitter: @nathuynh
