Nikkei 225 Technical Analysis: Time To Pause, Build Solid Base

Nikkei 225 Technical Analysis Talking Points:

  • The Tokyo stock benchmark is at new, 27 year highs
  • However, its rise has been quite sharp and it now needs a rest
  • Retracement support looks very likely to hold

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Another week, another 27-year peak for the Nikkei 225. The seemingly unstoppable Tokyo stock benchmark continues to inch higher and, unsurprisingly, is starting to look in need of a rest.

The index has soared well above its 20-, 50- and 100-day moving averages in its climb to new peaks not seen since late 1991. However, it is now looking quite solidly overbought, with its Relative Strength Index at 74, well above the 70 level which usually sets alarm bells ringing.

The question for traders is how much lower consolidation is likely to take it. The index is a shade below its most recent significant high, October 1’s intraday 24,495 and there looks to be a cluster of modest support between 24,015 and 23559- the effective trading range in play between September 18 and 27.

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