The Nikkei Index Is Having a Moment of Truth

It has been a support throughout the whole of 2021, not to mention the end of the 2020. This support was recently broken, but just for a while (orange). What does this mean for the Japanese Index?

Normally, such a breakout, should be extremely bearish and we should see a slide towards 24000 points (violet) – another crucial long-term level that’s the highs of 2018 and 2019. The things is the price quickly reversed, driven by a positive switch in global sentiment. That reversal created a false breakout pattern (orange), which in this case can be extremely bullish.

What has to happen for the sentiment to be bullish, from the technical point of view, is the price closing the week above the blue support. We’re discussing a long-term situation here, so the candle has to be a weekly one, it can save us from irrelevant short-term noise. So far, it looks optimistic but it’s only Tuesday and a lot can happen in the next few days.

So, the gameplan is actually simple. If the price closes the week above 27000 points will be a buy signal and if the price closes the week below 27000 points, with a legitimate bounce, will be a sell signal.

For a look at all of today’s economic events, check out our economic calendar.