Nikkei in limited recovery in first two days of this week

• Significantly, last week, at the opening of the market on Wednesday, the Nikkei experienced a substantial bearish gap, falling from 38725.00 to 38050.00

Nikkei chart analysis

Significantly, last week, at the opening of the market on Wednesday, the Nikkei experienced a substantial bearish gap, falling from 38725.00 to 38050.00.  That move indicated that the index could pull back and look for new support at lower levels. Bearish consolidation continued until Monday when we stopped at the 35247.87 level. The new support was useful for us to initiate a bullish recovery to today’s high at 36537.68.

There is a new loss of bullish momentum and a turn to the bearish side again. The Nikkei is now again below the daily open price, which this time strengthens the bearish momentum. We can easily expect to see a new bearish gap below 36000.00 at the opening of the next Asian session. Potential lower targets are 35500.00 and 35000.00 levels.

The return to the bullish side is not complete until we return above the EMA 200 moving average

If the Nikkei manages to maintain its position above 36000.00 in the next session, we could witness a bullish consolidation and an extension of this week’s recovery. At 37000.00, the index is projected to surpass the EMA 50 moving average, a sign of a strengthening bullish trend. A further recovery above 37700.00 would establish new support, this time at the EMA 200 moving average.

With that step, we move into a strong bullish trend and expect further recovery. Potential higher targets are 38000.00 and 38500.00 levels. Of the Nikkei’s 225 components, 86 stocks rose, 138 fell, while one ended unchanged. The market remains cautious ahead of the outcome of the Fed’s interest rate decision, while we also have the Bank of Japan meeting this month.