Featured Trade Bearish reaction in Nikkei 225 below key MT resistance

Short-term technical outlook on Japan 225 (Thurs 07 Feb)

Key technical elements

• Since its 31 Jan 2019 low of 20639, the Japan 225 Index (proxy for the Nikkei 225 futures) has continued to its slow grind upwards within an average tight range configuration of 280 points, the lowest since the start of the rebound from 26 Dec 2018 low of 18970 within a minor bearish “Ascending Wedge” range configuration (see 4-hour chart).
• It has printed a recent minor high of 20983 on 05 Feb 2019, U.S. session right below the 21020 key medium-term pivotal resistance (click here for a recap on our previous weekly technical outlook), also the upper boundary of the medium-term descending channel from 01 Oct 2018 high of 24478 before it reversed down and broke below the minor “Ascending Wedge” support in today, 07 Feb Asian session (see 1-hour chart).
• 4 and 1-hour Stochastic oscillators continue to inch downwards and still has not reached their respective extreme oversold levels. These observations suggest that short-term downside momentum of price action remains intact and not “overstretched” at this juncture.
• Key short-term resistance stands at 20920 which is defined by the pull-back resistance of the former minor “Ascending Wedge” range support from 26 Dec 2018 low.
• The significant near-term supports rest at 20510/450 (23.6% Fibonacci retracement of the rebound from 28 Dec 2018 low to 05 Feb 2019 high & minor swing low of 24/29 Jan 2019) and 20200 (38.2% Fibonacci retracement of the rebound from 28 Dec 2018 low to 05 Feb 2019 high & former swing high area of 27 Dec 2018)

Key Levels (1 to 3 days)

Intermediate resistance: 20860

Pivot (key resistance): 20920

Supports: 20510/450 & 20200

Next resistance: 21020 (medium-term pivot)

Conclusion

The Index may see a further push down below the 20920 key short-term pivotal resistance to target the near-term support of 20510/450. A break below 20450 opens up scope for a further potential decline to test the next support at 20200 (also the medium-term downside trigger level).

However, above 20920 negates the bearish tone for another round of choppy push up towards the 21020 key medium-term pivotal resistance.