The Japan 225 stock index is looking increasingly neutral as it heads into the Ichimoku cloud. The index has been trading sideways after hitting a near two-year peak of 20322 in June. It is currently being supported by the 50-day moving average just above the 20000 level, as well as the top of the cloud.
Near-term momentum indicators are also painting a very neutral picture. The MACD is just below zero after a long period in positive territory, while the %K line of the stochastic oscillator is just above the 50 neutral level. The positively aligned %K and %D lines indicate some upside momentum is still in place.
If the immediate support level of 20000 holds, fresh upside moves would bring the June high of 203222 in focus as a key resistance point. A break above this level would signal a resumption of the longer-term uptrend that began in November last year, and open the way towards the June 2015 peak of 20945. Although before then, the area around 20500 – a previous congestion region – could prove a difficult barrier.
Failure to hold above the 50-day moving average would shift the short-term bias to bearish, while a drop into the cloud would confirm that the medium-term outlook has turned neutral. Support from inside the cloud should come from the previous support and resistance areas of 19900 and 19600.
