HomeContributorsTechnical AnalysisNikkei Index Falls Below 38,000 Points This Month for First Time

Nikkei Index Falls Below 38,000 Points This Month for First Time

According to today’s Nikkei 225 (Japan 225 on FXOpen) chart, the index quote dropped below 38,000 points at Monday’s low, followed by a recovery (shown by an arrow).

One of the drivers of the decline was the automotive sector, whose shares led during the downturn. In particular, according to Reuters, Toyota Motors’ shares fell by more than 2% as the company faces difficulties due to a certification scandal. Japanese national broadcaster NHK reported that Toyota will extend the production halt for some models until the end of July.

The fact that the Nikkei 225 (Japan 225 on FXOpen) price is recovering after dropping below the 38,000 mark suggests a false bearish breakout below this psychological level.

Technical analysis of the Nikkei 225 (Japan 225 on FXOpen) chart provides more insight into market dynamics:

→ Since the beginning of 2024, there has been a sharp rise from point A to point B by more than 20%;

→ This was followed by a retracement to point C, which constituted a Fibonacci 0.500 proportion of the A→B impulse;

→ Then there was a rise from C to D, forming a Fibonacci 0.382 proportion of the B→C impulse.

Thus, in the first half of the year, there has been a series of diminishing oscillations forming a triangle pattern, indicating a balance between demand and supply around the 38,380 axis.

Today’s potential bullish reversal (which is not yet fully formed) could confirm the relevance of the triangle’s lower boundary and direct the price towards its axis.

It is worth noting that the triangle boundaries are narrowing, and a possible imminent breakout of this graphical pattern, formed in the first half of 2024, could lead to the establishment of a noticeable trend.

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