Nikkei 225: Coiling below January highs as bulls await a break
With the yen showing signs of stabilisation, buoyancy in Japanese equities may soon return, putting a potential retest of recent highs back in play.
Looking at our Nikkei 225 contract, price is coiling within a symmetrical triangle structure inside a prolonged bullish trend, putting traders on alert for a potential retest and break of the January high at 54,500.
There are a few setups for traders to consider, depending on how the price action evolves today.
Should we see a retest and bounce from triangle support, longs could be set above the level with a stop below, initially targeting triangle resistance. If price instead pushes up toward triangle resistance and once again fails to break cleanly through the level, the setup could be flipped, allowing shorts to be established beneath resistance with a stop above for protection, targeting triangle support.
Given the coiling pattern price finds itself in, traders should also be on the lookout for a potential bullish breakout, which would put the January highs firmly in play. A break and close above triangle resistance, or a decisive intraday breakout, would allow longs to be set with a tight stop below, initially targeting 54,500. Given the multiple failures above 54,000, a close above that level would improve confidence not only in a retest of 54,500 but also in a resumption of the broader bullish trend.
While RSI (14) and MACD are pushing lower, with the latter having already crossed the signal line from above, the message from the oscillators is more one of caution for bulls rather than an outright bearish signal for shorts. It reinforces the idea that setups shouldn’t be forced, and that patience is key while price works through this consolidation.
Good luck.
DS