The Nikkei 225 trades within touching distance of the 30,000 level as bullish sentiment in broader financial markets continues to propel the leading Japanese index towards new all-time highs on a daily basis.
This week’s price surge was driven by positively towards the $1.9 trillion United States stimulus package and reports that Japan is considering lifting the ongoing state of emergency in some areas.
Such were the pace of gains in the Nikkei 225 on Monday that the Japanese Chief Cabinet Secretary Kato was forced to issue a statement that Japanese officials were closely watching the ongoing market moves.
Going forward it appears that the ongoing breakout has real validity. The prospects of more QE from the FED and the BoJ seem assured to stop the ongoing rally fizzling out. The near-term risk event for the Nikkei 225 is company earnings from the land of the rising sun.
Softbank Group, Harmonic Drive System, Japan Petroleum Exploration, Sumitomo Metal Mining, Orix Corp, and Kansai Paint are also set to release company earnings this week. Softer company profits could certainly dent the rally or create near-term head winds.
However, the wider picture in global market remains one of optimism. Markets are looking forward to better days and putting the pandemic behind them. Theoretically, traders and investors are betting on the improving consumption story once the pandemic ends.
The latest news of restrictions being reduced in Japan is certainly positive. Additionally, Japan is well-placed to take advantage of demand from the Chinese economy, which is currently the best performing developed economy.
From a technical perspective the signs of an ongoing breakout are littered across the higher time frames. The Nikkei 225 has broken above the upper Bollinger Band on the daily, weekly, and monthly time frames.
Sentiment towards the Nikkei 225 is notably bearish at the moment, which bodes well for the ongoing breakout. The ActivTrades Market Sentiment tool shows that 76 percent of traders are leaning against the ongoing bullish move. Expect the rapid upmove to continue all the time retail participants continue to fade the bullish rally.
Nikkei 225 Short-Term Technical Analysis
The four-hour time frame shows that a bullish inverted head and shoulders has been activated, following the recent breakout in the Nikkei 225 index above the 29,000-resistance level.
According to the size of the bullish pattern the index could rally towards the 30,500 level over the short-term. For all intents and purposes, we should expect the rally to continue while the price holds above the 29,000 level.
Source by ActivTrader.
Below the 29,000 level the 28,400 level offers major support. If a breakout below this area takes place then the Nikkei could capitulate towards the 28,000 area.
Nikkei 225 Medium-Term Technical Analysis
Looking at the daily time chart, an extremely large bullish reversal pattern remains in play and continues to point towards an ongoing rally towards the 32,400 level over the medium to long-term horizon.
As always, the key short-term moving averages will lead the way. The Nikkei 225 continues to trade above its 20 and 50-day moving average, which is certainly very bullish.
The 20-day moving average is found at 28,400, and is a key area to watch on pullbacks, alongside the 50-day moving average, which is found around the 27,400 level.
Source by ActivTrader.