Nikkei 225 has been trading within a small sideways range recently, between the 22570 support and the key resistance of 23600. Although the index is closer to the range’s upper bound, until we see a clear exit, we prefer to stay sidelined.
A clear and decisive break above the 23600 barrier, which was tested three times recently, would confirm the upside exit out of the range, as well as a forthcoming higher high. The bulls may then get encouraged to push the battle towards the 24160 zone, which was hit on December 16th, or the 24480 area, marked by the high of October 1st, 2018. If the bulls are not willing to stop near those resistance zones, a break higher will take the index into territories last seen in 1991. The next target may be the 2560 area, which is the high of September of that year.
Looking at our daily oscillators, we see that the RSI has been recently oscillating around 50, while the MACD, although fractionally above both its zero and trigger lines, points east. Both indicators detect a lack of directional momentum, which supports our view to stay sidelined for now, at least with regards to the short-term outlook.
In order to start examining whether the bears have gained the upper hand, we would like to see a drop below the lower end of the aforementioned range, at 22570. Such a move would confirm a forthcoming lower low and may trigger declines towards the low of July 31st, at 21675. Another dip, below 21675, could see scope for more bearish extensions, perhaps towards the 20825 barrier, marked as a support by the inside swing high of May 20th.
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