My Charting Blog: Interesting Nikkei behavior

Japan has a new prime minister last weekend.

The Shigeru Ishiba resigned as the prime minister following major electoral defeats of the LDP-Komeito coalition. This followed with an LDP presidential election with Sanae Takaichi won.

As a result, she became the first female prime minister of Japan. On appearance, Sanae Takaichi is more conservative with Japan's interest come first. Her mindset seems to be similar to that of Trump, except that she is more protectionist in area of immigration.

well, I did not take much note of it and went on minding my own business, after all, it was weekend!

It was to my surprise on Monday morning that Nikkei 225 actually opened with a 2,000 points gapped up!

However, it only went mildly upward before deteriorating throughout the week, losing every single point gain from gap up.

It is common for a counter to try recover a gap before continuation. However, attention is really needed if the gap is fully covered, it indicates weakness in the direction. Is Nikkei in possible reversal?

Fig 1. Nikkei weekly chart

My last up-date on Nikkei was Let's have an up-date.. in April 2025. I believed at that time that Nikkei should be on continuation downward.

Nikkei did not, reversed and even breaking the previous high.

At present, it managed to reach the 100% projection resistance of a major move.

I believe it is going to correct in the coming weeks, but it may not be ready for reversal just yet.

Reason?

There is not yet evidence of divergence for Nikkei on the MACD. Even though there is a potential sign of MACD crossing at this point of time, it is still in the positive zone, except that its momentum is getting weaker.

Where lies the support then?

I will use its 55-week moving average as reference for its support, which is 39,814.

Should there be break through on the upside however, I believe its 127% projection of 53,044 will be its next resistance.