NIKKEI-225 Analysis Indicates Possibility of CorrectionNIKKEI-225 Analysis Indicates Possibility of Correction from Historically High Levels
On March 21, the value of the Japanese stock index reached a historical maximum, exceeding the level of 41,100 points. This was facilitated by:
→ Weak yen supporting exporters. It increases the value of profits earned abroad for a large number of companies that sell their products abroad and then convert the profits into yen.
→ Demand for shares of Japanese companies paying dividends. For example, shares of air conditioner manufacturer Daikin Industries rose by 2.82%.
At the same time, the NIKKEI-225 chart signals indicate the likelihood of a correction, since:
→ The price is near the upper border of the ascending channel, from which resistance can be expected.
→ Based on the results of trading in the Asian session, a long upper shadow is forming on today’s candle – a sign of selling pressure (as shown by the arrow). It seems that the price of NIKKEI-225 is difficult to stay above the level of 41,000.
If the Japanese stock market follows a correction scenario, the price of NIKKEI-225 may be supported by:
→ the lower boundary of a steeper ascending channel (shown in purple), which runs in the area of the Fibonacci level = 50% of the A→B impulse;
→ psychological level of 40,000.
Bearish sentiment for NIKKEI-225 could be triggered by decisions from the Bank of Japan and the Ministry of Finance, which are concerned about the weakness of the yen — the USD/JPY rate is today near a 34-year low.
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NKY trade ideas
NIKKEI Gradually turning bearish for the next 3 months.Nikkei (NI225) has given us one of the best long-term trades last year (May 26 2022, see chart below), as we gave a signal for the most optimal buy entry one could expect, on the 10 year (since October 2012) Higher Lows trend-line, and from 26000 it has now surpassed 40000:
The question is obvious: what do we do from here, especially after the remarkable bullish start to 2024? To answer that, we have to to go to the logarithmic scale on the 1W time-frame and observe the Channel Up since the June 2012 bottom.
The biggest fact is that the current bullish leg of the Channel (since the March 2022 Low), has already surpassed the roughly +63% magnitude of the previous two legs by +3%. This suggests that we are forming the current Higher High but the 1W RSI hasn't yet made a Higher High of its own, so the rally may be extended for a few weeks more.
What has been very consistent though during this 12-year Channel Up, is the tops as identified by the Sine Waves. The next Wave Top is on January 2025 and that would be the time to sell towards a 1W MA200 (orange trend-line) test again. Nikkei though has formed the previous Highs on Double Tops, so it is possible to make a 1W MA50 (blue trend-line) correction now and then rebound towards January 2025 for a Double Top peak.
As a result, we now turn bearish on Nikkei for the next 3 months, targeting 36000 and after the 1W MA50 holds, buy again for an end-of-year target at 40000, before the next correction/ Bear Cycle starts.
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Is this a massive crab pattern?Japan recently officially announced a recession and then the BoJ raised interest rates for the first time in 17 years.
Which, of course, means Nikkei makes a new high for the first time in 30 yrs.
Because nothing is ever allowed to make any sense.
But maybe this is a massive crab pattern...
Which would make this a massive high.
Could be a larger expression the same type of pattern have have in SPX.
-======
If this fails, then it may be time to seriously consider the mega bull forecast I put out previously. I went long this in 2022 but got out while we were close to the high.
If the bear patterns fail, the case for a brand spanking new trend leg in Japan equities is viable.
But huge risk area here.
NIKKEI225 : THE BoJ ENDS THE NEGATIVE RATE ERA- The Japanese benchmarks has been registering higher highs and lows since 2023, the long-term trend is therefore bullish.
- Since the bullish breakout of the flag pattern, prices have accelerated to a new all-time high at 40,470pts.
Since then, the market pulled-back over 38,525pts, mostly driven by profit taking following a sharp rally, as well as anticipation of an hawkish monetary move from the BoJ.
Both 13 and 21 period moving averages remain bullish and the MACD indicator stays well-oriented in buying zone, with no sign of a bearish divergence so far.
- On one hand, it would be understandable to expect a little correction, or lateral consolidation following the strong acceleration prices have registered since the beginning of 2024, especially as the market now trades in uncharted territory.
However, technical indicators don't show any sign of a slowdown to come so far, and the final objective given by the flag pattern consolidation hasn't been reached yet.
In addition, the market has surprisingly reacted quite well to the BoJ's first rate hike in 17 years, probably because of a "sell the rumor and buy the news" phenomenon.
Investors and analysts are now split regarding the next rate hike from the Bank of Japan, which means that any hawkish hints or wording during the next meeting could significantly put pressure on the market.
On the other hand, if BoJ Governor Kazuo Ueda maintains an overall dovish stance, this could further fuel the rally on japanese stocks.
For now the 41,400pts target remains valid if the market manages to clear the last 40,470pts resistance, and an extension towards 43,800pts is also a possibility.
Pierre Veyret, Technical Analyst at ActivTrades
The information provided does not constitute investment research. The material has no been prepared in accordance with the legal requirements designed to promote the independence of investment research and such is to be considered to be a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
If Boj decided to up its rate, nikkei could see more down sideello fellow traders , my regular and new friends!
Welcome and thanks for dropping by my post.
simple as that as mentioned in title. :)
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Nikkei 225 Long Looking to long the Nikkei from 38750.
Indices are pushing strong at the moment across the board, and there is no reason yet to be bearish until a drastic shift in structure or in the fundamental outlook globally.
Stop Loss on this position will be: 250 points to cover the H12 50MA
Looking to take profits above the high for continued strength.
Confluences:
38% fibo, first time the bullrun has touched this*
Intra KL/KL
H1250MA
JPN225 LongPrevious long area did not the support the JPN225 therefore interest is now aligned to the next area of long interest in the JPN225.
COT data released Friday, shows us that institutions have been adding long positions to the JPN225 suggesting there is still a potential for a higher movement.
Confluences for this area of interest to long:
Big 23.6% fibo
Retest of the trendline previously broken
Key Level present
As well as the psychological number 38000
My position: Looking to long from 38177
SL of 200 points
Take profits gradual at 1:2 & 1:3
Catch you later traders ▲
Short term long and possibility of a reversalAfter studying JPN chart for good amount of time, I came to conclusion that the price will go up in the next few days then, there's a high probability of reversal. After going up steadily for two months, the price has broken the structure and made L, LL and LH in all major TFs. The RSI showing a strong reversal divergence in M, and W and interestingly, bullish continuation from D all the way to 1H.
Nikkei to continue in the uptrend?NIK225 - 24h expiry
We are trading at overbought extremes.
A lower correction is expected.
The bias is still for higher levels and we look for any dips to be limited.
We therefore, prefer to fade into the dip with a tight stop in anticipation of a move back higher.
Further upside is expected although we prefer to buy into dips close to the 38910 level.
We look to Buy at 38910 (stop at 38710)
Our profit targets will be 39410 and 39510
Resistance: 39626 / 40000 / 41000
Support: 38415 / 37940 / 37020
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Nikkei225 surpasses ‘Historic Milestone’ on mixed inflation signOn Friday, the rising sun market surpassed a significant milestone at 38,957.44 points, surpassing the 1989 trading level , just before the so-called "Lost Decade". During the period from 1991 to 2001, Japan experienced economic stagnation and price deflation, from which it emerged, albeit at a slower pace compared to other industrialized nations. In terms of core (year-on-year) inflation, Japan has maintained levels above the Bank of Japan's 2% target since November 2022, reaching a peak of 4.3% in September 2023, the highest in 42 years. However, a softening has been observed in December to 3.7%, with forecasts suggesting a further drop to 3.2% in January 2024, following 20 years of economic policies known as "Abenomics". This trend has led to a slight depreciation of the yen against the dollar (JPYUSD) , especially following data on Japanese inflation, projected at 1.8% next Tuesday versus 2.6% previously. This outlook could reinforce the anti-easing stance of the Bank of Japan, the most reluctant and cautious among central banks in developed markets.
As for the 30-year Japanese Bond, a slight revaluation of 0.72% has been observed, coinciding with US bank data that pushed the index to highs. Rebound levels are at 33,905.71 and 30,509.91 points, with key support at 24,396.24 points, reached in March. Japanese tapering policies are likely to continue to underpin the index higher as the country's debt is reduced. In the long term, an uptrend is expected, although a prior adjustment around 39,636.65 points is not ruled out. Currently, the RSI indicator points to an overbought level of 75.05%, which could indicate the need for an adjustment in the short term to form the aforementioned rebound.
Ion Jauregui - AT Analyst
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.