Talking Points:
- Nikkei 225 Strategy: Prepare for pullback if 18,000 holds on the downside
- Downward momentum is near exhaustion, could provide early hints on change of direction
- A break below 18,000 might lead to a repeat of the trough in August-October
Nikkei 225 trades sideway for a second day after it broke below the neckline of October-December head and shoulders pattern at 18,633. Downside moves and 18,000 level came into focus as risk-off spread around Asia after a high USDCNY fix today.
After passing Monday low at 18,086, JPN 225 is now precariously close to 18,000 mark with future markets pricing in lower levels than on the exchange. Any clean break below this may bring about a repeat of the trough during August-October, in 17,000-18,000 area.
Long-term investors should prepare for moves in either direction, especially upon a contest of support. Downward momentum is near exhaustion and any rebound could be hints for a pullback to the neckline. Short-term traders could play the current range with emphasis on downside volatility, given tight stops.
Losing Money Trading Forex? This Might Be Why.
--- Written by Nathalie Huynh, Strategist for DailyFX.com
Contact and follow Nathalie on Twitter: @nathuynh
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