NIKKEI in danger of crashing

S&P short-term technical analysis
May 6, 2014
Τι πορεία πιστεύετε οτι θα έχει η αγορά;
May 8, 2014

NIKKEI is again above critical support area of 13900-14000 and the technical picture of the index is not giving away any bullish promises. After topping near 16300 the index is making moves lower with lower highs that reach the 61.8% Fibonacci retracement of the previous downward move. With lower lows that keep finding support between 13900-14000 I believe that soon we will see a breakdown of this support level. This will be a significant market event, because if support fails we should anticipate NIKKEI to fall at least 1000 points lower.

nikkei3

Many see the current pattern in NIKKEI as an unfolding huge Head and Shoulders pattern with the neckline where the current support is at the 14000 level. Breaking this neckline gives a target lower at 11500 if the decline is equal to the size of the Head in our pattern as shown in the chart below.

nikkei1

Breaking below support will push the index towards the lower boundaries of the Ichimoku cloud as depicted in the chart below. The first important support is found at 13000 points and we believe that this will be the first pause of the decline. The same bearish picture if not worse comes from analysing USDJPY.

nikkei2

I decided to write a post about NIKKEI and how dangerous will be for bulls if support fails, as this will not only affect NIKKEI bulls but also bulls with long positions in worldwide equity markets as well. A breakdown below support will signal risk off in US and European markets as well, so traders should keep an eye on Japanese stocks and JPY for any sign of weakness. For more detailed analysis and my personal trades, become a member today.

As always, thank you for taking the time to read my new post.

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.