Nikkei 225 continues to trade within a short-term range, that has been in place since around the 20th of July. Until the index breaks one of the sides, we will remain neutral on the near-term outlook, but certainly we will keep an eye on the index’ activity.
A break through the upper side of the range could open the path towards the 23040 barrier, marked by the high of the 21st of May. A break of that barrier could set the stage for a possible move towards the 23500 zone, which was the high of the 1st of February. This is where the price could stall for a bit, as the bulls and the bears could start battling it out over who will take over onwards. If the bulls remain in control, this could lead to a test of the 23785 hurdle, which held the Nikkei 225 from moving higher on the 29th of January.
On the other hand, if the break out of the aforementioned range would happen through its lower side, this could be a good opportunity for the bears to jump in and drive Nikkei down to the psychological 22000 level. Slightly below lies the short-term upside support line taken from the low of the 25th of March. The upside line could act as a bouncing ground, from which the index could move back up again.
If that upwards moving support line fails to hold the price from dropping, the move could then lead to a test of the 21740 level, marked by the low of the 11th of July. Slightly below that lies the next strong area of support at 21450, which was the lowest point seen in July.
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