- Price actions have broken below the 20-day moving average and minor ascending channel support.
- Potential short-term corrective decline within a medium-term uptrend in place since the 15 March 2023 low.
- 33,200 is key short-term resistance to watch.
This is a follow-up analysis of our prior report, “Nikkei 225 Technical: Overstretched rally” published on 15 June 2023. Click here for a recap.
Fig 1: Japan 225 short-term & medium-term trends as of 6 Jul 2023 (Source: TradingView, click to enlarge chart)
After a stellar up move of +29% within three months from its 15 March 2023 low to hit a 33-year high on 16 June 2023, the Japan 225 Index (a proxy of the Nikkei 225 futures) has dropped by -5% to print a recent minor low of 32,305 on 27 June 2023.
Minor uptrend from 4 May 2023 low is likely to be damaged
The Index has just staged a bearish breakdown below the lower limit (support) of a minor ascending channel in place since the 4 May 2023 low of 28,652 and the 20-day moving average which suggests that the prior minor uptrend has likely reversed to the downside.
In a longer-term frame, the medium-term uptrend phase of the Index is still intact at this juncture as the price actions are still holding above the lower limit of the medium-term ascending channel in place since the 15 March 2023 low of 26,449.
The short-term MACD trend indicator has turned bearish.
The 4-hour MACD has inched lower below its zero centreline and may have further downside pressure before it reaches its ascending trendline support (in green) which reinforces the minor decline seen in the price actions of the Index at this juncture.
Watch the 33,200 key short-term pivotal resistance to maintain the short-term bearish tone with the next supports coming in at 32,400 and 31,530.
On the flip side, a clearance above 33,200 invalidates the bearish tone to expose the 34,000 intermediate resistance, and above it sees the upper boundary of the medium-term ascending channel that is acting as a resistance at 34,900.
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Kelvin Wong