Japan’s Nikkei 225 traded lower on Friday, and extended its slide today, with the cash index now trading fractionally below the 26245 barrier, marked by the low of April 12th. Overall, the index has been trading within a trendless mode since April 6th, with most of the price action contained within a range between that 26245 barrier, and the resistance of 27475. Thus, in our view, the dip below 26245 is changing the picture to a more negative one.
If the break below 26245 is sustained, we could soon see a test near the 25970 zone, marked by the low of April 26th, where another break could allow the bears to aim for the 25755 hurdle, defined as a support by the inside swing highs of March 10th and 11th. If that barrier is not able to stop the fall either, then its break could set the stage for extensions towards the 25180 territory, which provided support between March 11th and 15th, the break of which could open the path towards the low of March 11th, at 24960.
Shifting attention to our short-term oscillators, we see that the RSI moved lower, closer to the 30 line, and still points south, while the MACD lies below both its zero and trigger lines. Both indicators detect strong downside speed and support the notion for further declines in this index.
Alternatively, in order to start examining the bullish case, we would like to see a strong recovery and a clear break above the 27475 barrier, the upper bound of the aforementioned range. This could initially target the high of April 21st, at 27755, or the peak of April 4th, at 28025. If market participants are not willing to stop there, then we could see them climbing all the way up to the high of March 29th, at 28645.
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