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Nikkei 225 Technical Analysis - Nikkei 225 Trading: 2018-05-25
Weak data bearish for Nikkei
Declining trade surplus and slower expansion in manufacturing sector are bearish for Nikkei. Will NIKKEI continue the decline?
Japan's economy contracted 0.6% on year in the first quarter, the first contraction in two years, and Q4 GDP was downwardly revised. The economy shrank as business investment fell while consumption and government spending were unchanged. Recent trade data showed the trade balance surplus declined in April though less than expected: to 626 billion yen from 797 billion in March. And disinflation continued in April: consumer prices declined 0.4% over month, same as in March. Meanwhile the Nikkei Japan Manufacturing PMI slipped from 53.8 in April to 52.5 in May, the weakest expansion in manufacturing growth in nine months. Slowing external sector earnings and manufacturing expansion is bearish for NIKKEI.
On the daily chart the NIKKEI: D1 has been falling after hitting three-month a week ago. The price is rebounding after testing the 50-day moving average MA(50).
- The Donchian channel is neutral: it is flat.
- The Parabolic indicator has formed a sell signal.
- The MACD indicator is above the signal line and the gap is narrowing, which is bearish.
- The stochastic oscillator is falling but has not reached the oversold zone.
We believe the bearish momentum will continue after the price closes below lower boundary of Donchian channel at 22070.10. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above last fractal high at 23043.60. 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 probable profit/loss ratio to the breakeven point. If the price meets the stop loss level (23043.60) without reaching the order (22070.10), 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 22070.10 |
| Stop loss | Above 23043.60 |
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