Technical Analysis – JP 225 index continues to edge sideways; sentiment remains weak  


Anthony Charalambous, XM Investment Research Desk

Japan 225 stock index (cash) has maintained a relatively horizontal structure despite weakening below all its simple moving averages (SMAs). The 50-period SMA is in the process of completing a bearish crossover of the 100-period SMA, while all SMAs are somewhat converging.

The short-term oscillators also reflect a state of weakened directional momentum. The MACD is barely in the negative region and below its red trigger line, while the RSI hovers beneath the 50 threshold. That said, should the price remain below the SMAs, extra deterioration may evolve as the bearish cross matures.

If the 200-period SMA continues to cap upside corrections, sellers may see immediate support from the mid-Bollinger band at 23,049 and the inside swing high of 22,982. Steeper declines may then reach the 22,722 low before a formed base from 22,530 to 22,612 attempts to halt the drop. Sinking under this foundation may send the price to test the 22,340 trough.

Otherwise, if buyers push above the 200-period SMA at 23,158, the next resistance may arise from the joined 50- and 100-period SMAs and the 23,280 barrier overhead. Climbing further, the 23,409 fresh peak may challenge the hike ahead of the upper Bollinger band of 23,454, followed by the 23,518 boundary.

In brief, the index holds a short-term neutral bias. A clearer path for the index may come from an initial decisive break either above 23,409 or below 22,567.