Nikkei 225 bounces off important longer-term support
We had a wild ride for global stock markets yesterday on the surprise result of the US election. The Nikkei 225 initially collapsed to important support on the weekly chart at 16,255.
In the weekly chart below you can see this as a 200-week moving average (the red line). This combines with 23.6% Fibonacci support taken from the peak of 2015 at 20,950 to the double bottom low set this year at 14,805.
The low yesterday at 16,100 overran the support level of 16,255 by a small amount but the longer-term 38.2% Fibonacci support at 16,091 held perfectly. This level is taken from the 2012 low at 8230 up to the 2015 peak at 20,950.
Yesterday’s incredible rollercoaster ride took the Nikkei very close to the peak for the previous day at 17,445. This level was scored when the initial polls reflected a potential win for Clinton.
Investors and traders now need to keep a close eye on the recent October peak at 17,495. If the sudden optimism continues with a break above this level, we can push on towards the April high at 17,745. We could even push as far as the January highs at 17,910. From here up to the 500-day moving average at 17,920 will be the next major challenge for bulls.
However, there is far more important resistance only just above here in the form of the longer-term 23.6% Fibonacci level of 17,948. Only 30 points higher we run into the 100-week moving average set at 17,978. Therefore, this relatively small 70-point band from 17,910 up to 17,980 presents huge challenges for the five-month bull run.
A sustained break above 18,000 would therefore be required to target 18,500/18,600.
In the short term the first support to the downside is around the 17,200/17,190 area. Falling below here we could target 17,090/17,070. Bulls really need to hold prices above the strong support at 16,940/16,920 if they want to remain in the short-term driving seat. For long positions here I would suggest a stop below 16,850.
Will the DAX find direction?
The DAX 30 chart has been a mess lately with prices generally hovering from just above 10,000 up to 10,800 for the past three or four months. Yesterday we tested the 38.2% Fibonacci support at 10,010, bottoming almost exactly here. This isn’t far below the 200-day moving average at 10,080 or far above the 18-month downward-sloping trendline support at 9930.
If we zoom in a little on the DAX daily chart we can see that we rocketed back up to a high of 10,678, with the November highs not far above 10,739. A push through here should re-test the highs for this year, set in August at 10,804 and October at 10,826.
The high of the last trading day of 2015 was 10,886, so a break above here should give bulls confidence, allowing them to target 10,990 and then 11,160.
Technical Analyst & Trader
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