Technical Analysis NIKKEI : 2018-11-16

[IFC Markets]

Slowing private spending and exports bearish for NIKKEI

Japanese economy shrank more than expected in third quarter. Will the NIKKEI continue declining?

The Cabinet Office of the government of Japan reported on Wednesday Japan’s economy shrank in the third quarter: the annualized 1.2% quarter-on-quarter gross domestic product decline in the three months to September 2018 was worse than a 1% contraction forecast, and followed a 3% expansion in the second quarter. The contraction was the result of a decline in private consumption, public demand and exports. Earlier data showed industrial production fell in September when a growth was expected, the same as household spending. Weak economic data are bearish for NIKKEI.

On the daily timeframe the NIKKEI: D1 has returned below the 200-day moving average MA(200) which has leveled off

• The Parabolic indicator gives a buy signal.
• The Donchian channel indicates no trend yet: it is flat.
• The MACD indicator gives a bearish signal: it is below the signal line and the gap is widening.
• The Stochastic oscillator is rising but has not reached the overbought zone.

We believe the bearish momentum will continue after the price breaches below the lower boundary of Donchian channel at 21467.00. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above the upper Donchian channel at 22575.40. After placing the order, the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the expected profit/loss ratio to the breakeven point. If the price meets the stop loss level (22575.40) without reaching the order (21467.00), we recommend cancelling the order: the market has undergone internal changes which were not taken into account.

Technical Analysis Summary

Position Sell
Sell stop Below 21467.00
Stop loss Above 22575.40