Technical Analysis – JP 225 index collapses to 4-month low; 200-SMA acts as support


Christina Parthenidou, XM Investment Research Desk

Japan’s 225 stock index (cash) collapsed on Monday as the coronavirus cases outside China increased, shifting funds towards safe havens. The index dived straight to the 200-day simple moving average (SMA) to 4-month lows, losing nearly 4.0% From Friday’s closure.

Should the 200-day SMA, which currently stands around the 61.8% Fibonacci of the 21,054-24,162 upleg, prove an easy obstacle, the market could experience additional losses probably towards the 21,863 barrier as the falling RSI suggests. Lower, the next stop could be near 21,480.

Otherwise, an upside reversal should stretch above 23,100 to ease worries of a down-trending market, with resistance coming next around 23,600. Before that, the inside swing low of 22,643 that is marginally above the 50% Fibonacci, and the former support region between the 38.2% Fibonacci of 22,954 and the 23,100 level could stop any upside correction.

In brief, JP 225 index is likely to see further deterioration if it closes decisively below the 200-day SMA. Such a move could also add more evidence that a downtrend is in progress in the medium-term picture.