Is Nikkei ready for a major reversal?

DAX short-term opportunities
June 26, 2014
Βραχυπρόθεσμη ανάλυση του FTASE25
June 30, 2014

NIKKEI has made a bearish reversal yesterday from its new 6 month highs. Together with NIKKEI we also saw a bearish price reversal in USDJPY. NIKKEI has finished 5 waves up from its lows from mid-April.  In the chart below you can see the 5 wave upward move in NIKKEI from just under 13900 to 15500. I at least expect a downward correction towards the 50% or 61.8% Fibonacci retracement of this upward move.

nikkei2

This time the risk off signals from USDJPY coincide with a bearish pattern in NIKKEI. So my target for the short-term is to fall towards 14600-14450. A reminder for USDJPY, the important level to watch is 100.70. Breaking below that level will signal risk off for Equities and most probably affect markets accross the globe. Breaking below 100.70 could push this fx pair towards 92-94.

USDJPY

NIKKEI has made a top and a bearish reversal at the 61.8% retracement of the downward move shown in the chart below. I label the decline as wave 1 and post below the chart with my elliott wave count of the decline.

nikkei1

The reversal at the 61.8% could mark the end of wave C as the pattern of A-B-C is clearly corrective with lots of overlapping waves. The only wave is C as I showed in the first chart of this post.

nikkei3

Counting waves was very complicated when analysing the futures contract chart and could only find an move when analysing the spot price of the index as shown in the chart above. Nevertheless, apart from Elliott waves, we are currently at a major resistance area and the bearish reversal justifies  a move lower. It is important for this pull back to make a higher low in order for the longer-term trend to remain intact.

I chose to mention NIKKEI today as I believe a market sell off in this index will have bearish implications for other major equity markets around the world. As always, thank you for taking the time to read my new post.

impulse-wave-rules

impulse-wave-rules

Alexandros Yfantis
Alexandros Yfantis
Fascinated by financial markets, studied International Securities Investment and Banking in the UK, works as a Portfolio Manager in Greece and runs a technical analysis website. Enjoys travelling and spending time with his family and preparing for the black belt in Korean Karate.