Jap225_m squeezed into “symmetrical triangle”

• Japan's benchmark stock index pares post-BoJ gains
   
• This index could be en route to “5th distinct touch”
   
• Friday's Japan’s CPI release may be next volatility trigger

 

Jap225_m, has not been immune from the pullback seen across global stocks over the past 24 hours.

On the heels of the Bank of Japan (BoJ) maintaining its benchmark rate at minus 0.1% on Tuesday, while offering no guidance on a rate hike in 2024.

Such policy signals, or the lack thereof, prompted the Japanese stock index to rally over 1000 points on the back of a weaker Yen.

NOTE: The Jap225 index has an inverse relationship with the Yen, i.e. when one strengthens the other weakens.

 

However, the Jap225_m then found resistance on a downward sloping trendline, when connecting highs of November 20th, 24th and December 19th, 2023.

As at the time writing, the daily candlesticks on the Jap225_m are finding support on its 21-day simple moving average which coincides with the 38.2 Fibonacci level, at 33180.

 

From a fundamentals perspective …

Heads up, Japan’s national CPI is due this Friday (Dec 22nd).

Economists are forecasting a 2.8% year-on-year rise (November 2023 vs November 2022).

That 2.8% figure would be slightly lower than October’s 3.3% year-on-year number, but still above the BoJ’s 2% target.

 

Jap225_m adhering to Bulkowski’s “symmetrical triangle” pattern

According to Thomas Bulkowski, in his book, “The Encyclopedia of Chart Patterns”:

“There should be at least five distinct touches of the two trendlines in a symmetrical triangle,… and each time making lower highs and higher lows.”

A 5th distinct touch may mean that Jap225_mmay break below the following potential support levels en route to 32333:

• 33180: the 38.2 Fibonacci level which coincides with the 21-day SMA
   
• 32969: the 50.0 Fibonacci level
   
• 32758: the 61.8 Fibonacci level
   
• 32570: the 50-day SMA.

 

However, if Japan’s CPI disappoints markets, potential resistance areas for the Jap225_m could also reveal themselves at

• 33442: the 23.6 Fibonacci level
   
• 33627: the upper bound trendline of the symmetrical pattern

The Japanese index bulls (those hoping prices will move higher) will be looking for Jap225_m's upward momentum to continue and print new multi-decade highs.

For context, that intraday high on 16th June 2023, when the Jap225_m briefly broke above the 34,000 mark, was the highest level since 1990.

 

Finally, volume can be seen decreasing through the formation of the symmetrical pattern.

Increasing volumes around potential breakouts of this symmetrical pattern may be a pointer as to the next impulse move in the index.

 

 

Jap 225 Bank of Japan Technical Analysis