The Nikkei Index which represents the Japanese economy tells us about the health of Asian markets. Learn where the index is likely to go as we do an in depth analysis of the Nikkei using technical analysis.
I rarely have a look at the Nikkei Index but once in a while its a good idea to look at another country's index as well. Perhaps once a week will be ideal.
The Nikkei has also experienced its own rollercoaster ride. When the US market plunged it also plunged.
Nikkei was able to find support at the previous highs. Thus it is very important for us to always be aware of support areas as it may help to halt the drop. Nikkei then broke a downtrend line and this is a signal of health.
Breaking a downtrend line may mean that Nikkei is ready to start a new uptrend. Notice how the Japanese index has traded back above the 20 MA and 50 MA as well. It is currently experiencing a bullish cross and if it follows the way the last time the bullish cross occur then we might have another nice run up.
What we want to see is for Nikkei to stay above the support line I have drawn and perhaps form some kind of continuation pattern. By the looks of it, a cup with handle pattern is quite possible. If the Nikkei drifts sideways for awhile and then breaks out, it is likely to move higher in the near future.
Of course not everything follows our analysis and that is why it is important to watch out for any weaknesses. Do be careful if Nikkei drops below the support line and especially if it drops below the 21500 area.
Today is the first day of Chinese New Year and I managed to squeeze some time to update some stuff. Most of the Asian stock market's are closed but the Japanese market is in session. Interestingly the Nikkei is able to find support at the 200 MA. Which is why as traders and investors, we should always be on the lookout for indices hitting its 200 MA.
That is because many will be able to find support at its rising 200 MA.
A long legged doji appeared in the daily chart of Nikkei futures as it nears the 200 MA. This told us that selling momentum has slowed down. Since it is able to find support here, we want to see it trade back above the downtrendline in order for it to be able to move back into the old highs.
Nikkei is a bit lagging compared to the US indices but at least it is finding support and bouncing up.
The chart above shows the 60 min chart of Nikkei Futures. As you can see, it has gone back above its 60 min 20 MA, 50 MA and 200 MA. This is a bullish sign and it tells us that the Nikkei is now trying to start a new 60 min uptrend. We should continue to be bullish on Nikkei as long as it stays above the 50 MA.
There is now a support area below after it broke above the congestion area. That is the recent support that we want to see Nikkei stay above. As long as Nikkei is able to stay above this support area and continue to make higher highs and higher lows in the 60 min chart, I believe Nikkei will be able to move back to the area of the old highs before the correction.
The massive plunge in the Dow has left nothing unscathed in its path. That includes the Hang Seng Index and the Nikkei Index. You see, the whole world is so interconnected today that what happens in New York does not stay in New York anymore.
The chart above shows the weekly chart of the Nikkei Index. As you can see, the index is collapsing to an area of long term support. This is the place to start to be bullish on the Nikkei again. But what you want to see is for it to stabilize in the lower time frames before you dip your feet into Japanese stocks again.
The daily chart is reaching the daily 200 MA but selling has not stop yet. We still need to have it stabilize first. It may fall a bit more and zig zag as it tries to find a bottom. If you want to see Nikkei go back up again to its new highs, it has to break above the downtrendline. That might take some time.
The 60 min chart of Nikkei gives us a hint of how volatile trading is. Because the weekly charts of Nikkei still has some falling to do before it reaches long term support, investors are still nervous to put their money in. Which explains why the movement in the Nikkei is so erratic.
Nikkei has not started a new uptrend in the 60 min charts yet. In such an environment, I would only be bullish on Nikkei again when it trades back above the 60 min 200 MA.
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