DISCLAIMER: I am not a financial advisor nor certified analyst and definitely not a pro trader. All contents discussed on this blogpost are solely my own personal views and for Trading education/entertainment purposes only. Trading the Indices is extremely risky where losses can exceed deposits. Enter with discretion. Do your own research and due diligence. The basis of this trading analysis is purely technical in nature.
Happy Sunday to all.
The global markets will be open again tomorrow and as I have reviewed the top performers from last week which included the WTI and USDJPY, I picked the Japanese Nikkei (JP225) index for some potential correlative moves for the upcoming week.
Just recently on Friday, the USDJPY managed to re-test its 3-year high above the 114 mark which in fact created a slightly third lower high which can be unnoticed at first glance when viewing the said Forex pair’s monthly chart.
From this move, I will speculate that there can be a bullish correlation on the Nikkei knowing that the US Dollar might set for a decline against one of the safe haven assets that is the Japanese Yen after hitting a weekly RSI above 75 and can be in overbought territory already.
I believe that the 115 mark is a strong sell/short signal for the USDJPY and traders/investors will have to take profit past 114 as prior defense. However, anything can happen and the Greenback might extend its consecutive bullish move against the Yen. We will find out soon enough.
Sticking with our trade plan for the Nikkei, like I said earlier I will be bullish bias which I will explain the technicals from this point.
We will use a Fibonacci extension level from the index’s March 2020 low up to its 2021 high 4-5 weeks ago just last September. That should set our trading range bounds.
There was a clear trendline breakout to the upside on February 2020 high reference from the first week of August 2020. This breakout paved way for the index’s fresh 2021 high by September before the weekly bearish reversal had occurred.
The first week in October had resulted for a test of the previous key resistance into a support and indeed buyers were able to stop the more slippage chances. Although the weekly Ichimoku clouds were touched twice but eventually the index performed two double weekly bottoms forming a new higher low bounce from March 2020 low’s perspective creating a supportive ascending channel. I speculate this as a bullish move.
The index’s weekly MACD had just managed enough foothold to create a price capitulation while the RSI held also above 50 level and buyers will continue to push the price northbound. Once the weekly RSI breaks above 63, it can result for a more bullish momentum.
My long entry will be near the Nikkei’s Ichimoku Kijun or Base line around 28,500. I will anticipate for a minor pullback first before next rally upwards. I shall set a stop loss at the 25,500 level where can lead for more downside action heading to the 38.20% Fib level.
We might never know that the said index can even create a 3rd 2021 yearly high if we are right for this plan. The 33,000 mark will be my take profit exit.
Overall, this trade plan has an estimated risk:reward score of 1.50 only. Take note that I’m using a weekly time frame not a bad deal.
Thanks a lot for reading my latest Finlogix article and I wish you a great trading week ahead.
