Technical Analysis NIKKEI : 2016-10-19

Japan’s stock market consolidates ahead of earnings season

Earnings season for Q3 2016 will start in Japan this week. Market participants believe the data may be positive.  Nikkei  index approached the upper boundary of sideways trend. WIll it continue advancing?

On the daily chart Nikkei: D1 has approached the upper boundary of triangle. Its further increase is possible on positive corporate earnings for Q3 2016.

• Parabolic is giving bullish signals.
• Bollinger bands have narrowed which means lower volatility. They are slightly tilted upwards.
• RSI is above 50, no divergence.
• MACD is giving bullish signals.

The bullish momentum may develop in case the Nikkei index surpasses the last fractal high, triangle boundary and upper Bollinger band at 17100. This level may serve the point of entry. The initial stop-loss may be placed below the lower Bollinger band, the Parabolic signal and the 200-day moving average at 16400. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 16400 without reaching the order at 17100, we recommend cancelling the position: the market sustains internal changes which were not taken into account.