- The Nikkei 225 has respected its long downtrend in the past week
- However, it has been brushing along its upper limits
- Hope for a break to the upside remains
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It’s quite rare to return to a technical chart one week later and see a trend so utterly respected as has been the Nikkei 225’s current downtrend.
The channel in question has been in place since January 29 and is itself an intensification of the retreat from the 26-year highs made earlier that month.
And you can see how closely the past few days’ trade has tracked that channel. The bulls have made tentative attempts to get above it but none of them has held good on a daily closing basis, as you can see.
Of course current market pricing remains much closer to the top of this downward channel than to the bottom, suggesting that the bulls have yet to give up hope of a breakthrough.
Much may now depend on where the index closes out this week. If it’s still conclusively below the downtrend channel line (which will come in Friday around 21,661), then that last upward push, which peaked out at 21,929 last week, will probably have failed.
In that case support at more recent lows of 21,491 and 20,983,5 will be in focus, If that latter one gives way then a trial of the lower bound of this range is probably coming up. Upside targets are harder to gauge while the index is showing such tepid resolve. However, a conclusive break higher would probably need to get up to the last significant peak-February 27’s 22,494- to stand any hope of lasting.
For now, however, the Tokyo equity benchmark remains stuck in the broad range which has endured since February 6. On its daily chart it seems to be falling away from both the range peaks of February 27 and February 19.
The downside perhaps –at least for those looking for some excitement- is that that offers little obvious possibility of a break in either direction. However even given that it still gives traders a potential 1600 fairly solid points to play with even if it holds.
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— Written by David Cottle, DailyFX Research
Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!