Talking Points:
- Japan’s Nikkei 225 stock index has been stuck in a range since May 21
- However, it does seem to like the upper echelons of that band
- The case for a new range bottom seems secure, but what about a new top?
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There’s a quiet technical optimism about the Nikkei 225 which may not be immediately obvious.
After all, at first glance the index remains firmly stuck in the narrow trading range which has contained all the action since May 21. That range is bounded to the upside by June 20’s intraday peak of 20321. That’s also 2017’s high and indeed the bulls’ best effort since late 2015. To the downside lies May 30’s intraday nadir of 19580.
So, where’s the optimism? Well, most obviously the index has still yet to show any obvious exhaustion despite its enduring proximity to the year’s high. But there’s something else at work here too.
The Nikkei is showing a clear preference for the upper half of the range, even if it yet displays no inclination to break it to the upside. Indeed June 15’s intraday low of 19744, and its closing low of 19823, mark support levels which have not broken since June 1.
Last week’s hypothesis that the index could be establishing a new range base in this area has been borne out since. But if that base is going to be any sort of launch pad for a foray higher it has yet to prove it. The last serious attempt at the range top faltered on June 28, some way short of the peak. It seems likely that there’ll have to be another, successful try at it if the new range bottom is not to be tested.
— Written by David Cottle, DailyFX Research
Contact and follow David on Twitter:@DavidCottleFX