Technical Analysis – JP225 index unable to push through the 100-SMA

Anthony Charalambous, XM Investment Research Desk

Japans’ 225 stock index experienced a one-week rally from a low of 20,097 past the 50-period simple moving average (SMA), to then hit a wall at the 100-period SMA. The 50- and 100-period SMAs have begun to converge and momentum has started to evaporate.

The indicators, although in positive territory, reflect a decreasing positive directional momentum as the MACD has dropped below the red trigger line near the zero line, whilst the RSI is declining to try and breach the uptrend line and the 50 level.

In the negative scenario, if pressure to the downside from the 100-period SMA prevails, the price could face some friction at the 50-period SMA before testing the 20,465 support. If the swing low of 20,465 gives way, the 20,370 level could hinder further losses, which is the 23.6% Fibo of the down leg from 21,824 to 19,917. The bears would then need to push lower past the 20,282 low of June 4 for the swing low of 20,097 to draw focus.

A positive picture would need the 100-period SMA to first give in so the swing highs around 20,790 can be tested. If the bulls begin to dominate, the inside swing low of 20,985 could play out after the breach of the 50.0% Fibo lying at 20,873.

Summarizing, in the short-term, things look grim for a positive push up, but a shift above 20,985 could turn the bias back to neutral-to-bullish.