Technical Analysis – Japan’s Nikkei at critical levels; looks to reverse uptrend
February 5, 2014 8:56 am
(click to enlarge)
The Nikkei 225, the Japanese stock average, was one of the best performing stock markets in the world during 2013, rising in excess of 50%.
The last trading day of 2013 also marked a 6-year closing high for the Nikkei 225 at 16,400 (on a front-month futures basis). The level also marks an important resistance point, which needs to be overcome to say that the uptrend is resuming.
Since hitting this level, the index has dropped by 14%, breaking important technical barriers along the way such as the psychological 15,000 and 14,000 levels as well as the important 200-day moving average. During the last two sessions it has tested the 14,000 level, which has managed to hold for now.
Immediately below the 14,000 level lies the 13,900-13,700 support area, which was an area that provided support in October and November of 2013. If the index falls below this, it would cancel the Nikkei’s uptrend, as the index is already trading under its 200-day moving average.
Below this level, there is another support level of 13,180, which is the August 2013 low. 13,120 would also technically mark the beginning of a bear market for the Nikkei (20% drop from the high).
On the upside, any reaction of the index could be capped at the 200-day average at 14,561 or at the resistance level of 15865.
The RSI is negative but bordering on oversold levels at 30.36.
To sum up, the Nikkei’s bull market has suffered a lot of technical damage so far during 2014. The present levels near the 14,000 mark could present an opportunity for a short-term bounce – provided the 14,000-13,700 support holds. The index would then have to prove it is still in an uptrend by regaining the 200-day average and eventually by challenging and overcoming the 6-year highs above 16,000.
On the other hand, if it drops below 13,700, the downside will increase further, cancelling the uptrend and opening the possibility for a bear market.
(click to enlarge)
The Nikkei 225, the Japanese stock average, was one of the best performing stock markets in the world during 2013, rising in excess of 50%.
The last trading day of 2013 also marked a 6-year closing high for the Nikkei 225 at 16,400 (on a front-month futures basis). The level also marks an important resistance point, which needs to be overcome to say that the uptrend is resuming.
Since hitting this level, the index has dropped by 14%, breaking important technical barriers along the way such as the psychological 15,000 and 14,000 levels as well as the important 200-day moving average. During the last two sessions it has tested the 14,000 level, which has managed to hold for now.
Immediately below the 14,000 level lies the 13,900-13,700 support area, which was an area that provided support in October and November of 2013. If the index falls below this, it would cancel the Nikkei’s uptrend, as the index is already trading under its 200-day moving average.
Below this level, there is another support level of 13,180, which is the August 2013 low. 13,120 would also technically mark the beginning of a bear market for the Nikkei (20% drop from the high).
On the upside, any reaction of the index could be capped at the 200-day average at 14,561 or at the resistance level of 15865.
The RSI is negative but bordering on oversold levels at 30.36.
To sum up, the Nikkei’s bull market has suffered a lot of technical damage so far during 2014. The present levels near the 14,000 mark could present an opportunity for a short-term bounce – provided the 14,000-13,700 support holds. The index would then have to prove it is still in an uptrend by regaining the 200-day average and eventually by challenging and overcoming the 6-year highs above 16,000.
On the other hand, if it drops below 13,700, the downside will increase further, cancelling the uptrend and opening the possibility for a bear market.
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