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The Bearish Chart Setup Starts to Unravel in Nikkei

Stock markets retraced higher in the last two weeks after the tumble in December. Nothing really changed in global politics or economics to reverse the trend. So in my opinion, this pullback higher was just a retrace of the bigger bearish trend since trends need refreshing now and again. With this idea in my head, I decided to go long on the Japanese Nikkei last week and it is increasingly looking like it was the right decision.

The chart setup pointed to a bearish reversal when I opened this long term signal several days ago and Nikkei is looking even more bearish now. As you can see from the daily chart above, the stochastic has been overbought for some time which means that the retrace higher has been complete for days now.

The 20 SMA (grey) is also providing solid resistance to the top side here. The buyers have tried to overcome it and push the price above the 20 SMA but they have failed every time. So, it seems that the upside is safe and now the pressure turns to the downside.

The market sentiment has turned negative again today after being slightly positive for some time. GOLD is climbing higher today while USD/JPY is slipping lower. In such market conditions, stock markets tend to turn bearish and that’s what’s happening.

Nikkei has turned bearish today and our signal is more than 200 pips in profit, although it seems like the sellers are having some trouble breaking below the zone which engulfs the 20,000 level which is a big round level. We might close this signal manually for a hefty profit if Nikkei doesn’t break below 20,000 soon.

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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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