The Nikkei 225 has sold off over the last few weeks, but it looks like we are trying to turn things around on Monday.
NIKKEI 225
The Nikkei 225 has experienced a pretty significant drop over the last several weeks, but it has turned around to show signs of life near the 51,000-yen level. This is a market that is starting to turn things around during the trading session as we did get a little bit of a risk appetite producing social posts from Donald Trump saying that the Americans and the Iranians are starting to talk.
This of course is a very good sign, and it does bring in more along the lines of hope out there for traders that have been struggling. The 50,000-yen level underneath is a significant round and important figure that traders will be watching especially considering that the 200-day EMA sits just below there.
Buying on Dips and Upside Potential
The market at this point in time should continue to see a little bit of buying on dips and if we get that move it's possible that traders will test the 50-day EMA above. In fact, at one point during the session on Monday, we did reach just below there. If we can break above that level on a daily close it opens up the possibility of a move to the upside perhaps the 60,000 level.
The market continues to be very noisy and difficult, but I think at this point in time you need to be very cautious about getting overly aggressive with any position size in any index around the world. The Nikkei 225 is a bit special in the sense that Asia will continue to be very susceptible to the oil shock going on in the Middle East and at the same time there are questions about whether or not the Bank of Japan will have to intervene in the currency markets and that has a bit of a knock on effect here in the export sector.
With that being said while I am bullish of this market, I recognize that we will get a pretty significant amount of volatility at times. I do not have any interest in shorting this market and I believe ultimately, we will probably try to revisit the highs, but we need a lot of good news between now and then.
Potential signal: I am buying Nikkei 225 above 54,400 with a stop at 53,500 below. I am aiming for a move to 59,000