nikkei 225 corrective rebound in progress before new potential downleg 1843192017

Short-term Technical Outlook (Wed, 01 Feb 2017)

(Click to enlarge chart)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has managed to shaped the expected corrective rebound within its medium-term downtrend as per highlighted in our weekly technical outlook report published yesterday (click here for a recap).

Key elements

The on-going corrective rebound has been reinforced by the USD/JPY which has managed to hold above the 112.50 medium-term range support in place since 24 January 2016 swing low area. In addition, the U.S. S&P 500 has also managed to have a daily close above the intermediate support of 2277 which has kept the potential “last push up” scenario alive.
The potential corrective rebound target for the Japan 225 Index stands at 19200/290 zone which is defined by a confluence of elements. The minor trendline resistance (in pink) from 27 January 2017 high and the 50&/61.8% Fibonacci retracement of the recent decline from 26 January 2017 high to yesterday’s U.S. session low of 18835.
Based on the Elliot Wave Principal and fractal analysis, the decline from 26 January 2017 high of 19575 is likely the completion of a minor degree bearish impulsive wave, labelled as 1. Right now it is undergoing a minor degree corrective up move (dead cat bounce) to retrace the prior bearish impulsive wave before another potential bearish impulsive downleg materialises (wave 3).
The hourly Stochastic oscillator continues to inch upwards towards an extreme overbought level which suggests that residual upside momentum of price action remains intact.

Key levels (1 to 3 days)

Intermediate resistance: 19200/290

Pivot (key resistance): 19400

Support: 18700/650

Next resistance: 19575 (medium-term pivot)

Conclusion

The Index may see a further minor push up (dead cat bounce) at this juncture towards 19200/290 with a maximum limit set at the 19400 short-term pivotal resistance before another potential downleg materialises to target the next support at 18700/650 (swing low area of 17 January 2017) in the first step.

However, a break above 19400 is likely to put the bears on hold to see a further squeeze up to test the 19575 medium-term pivotal resistance.

Charts are from City Index Advantage TraderPro

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