Japan’s 225 stock index (Nikkei 225) gained some ground after dropping to a 15-month low of 19,239 in the first week of the year and is now looking for a cross above the 20-day simple moving average. In the short term the index could consolidate as the RSI is ready to touch its 50-neutral mark, while the MACD continues to improve towards the zero line. The red Tenkan-sen line is flattening after a small rebound, supporting this view as well.

An extension lower may pause around 19,672, taken from the tops registered during the first quarter of 2017. Below that point, the bears will push hard to break the 19,239 bottom to allow more sellers to enter the market. If their efforts prove successful, the price will probably head further down to the 19,000-18,200 area.

On the upside, the 23.6% Fibonacci of 20,464 of the downleg from 24,472 to 19,239 could act as a barrier as it did two days ago, while above it, resistance could be found near 20,960. Moving further up, the way could open towards the 21,228-21,452 region where the 50-day MA and the 38.2% Fibonacci are located. Steeper increases may also touch the 50% Fibonacci of 21,850.

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In the bigger picture the outlook remains negative as long as the price holds below 21,452.


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