The Japanese stock market, the Nikkei, looks like it may have completed its bear market yesterday at the 16017 quote which was just over 23% down from the previous high. Let’s take a bottom up approach to the analysis beginning with the daily chart.

NIKKEI DAILY CHART

I have drawn an Andrew’s Pitchfork from the 2015 high. This shows a recent pattern of three consecutive lows over the August/September 2015 time period finding support at the lower channel. Price then traded bullishly out of this pitchfork formation before coming right back down and nudging back into the upper channel yesterday. Price looks to have been rejected at this channel support and moved up solidly today.

The PSAR indicator shows price busting the dots on the upside today so a bullish bias is now in force although this is my tight setting and will need some upside follow through.

The Bollinger Bands show price clinging to the lower band on this move down and we still wait for a clear break away from this band to confirm a new upleg has begun.

This low set up a bullish divergence on the RSI while the MACD indicator looks set to show a bullish crossover on another up day.

NIKKEI WEEKLY CHART

I have drawn a Fibonacci Fan from the 2011 low and it shows the bear market trading down from the top in stair-step fashion with the first low at support from the 38.2% angle before rallying back up and putting in a lower high at resistance from the 23.6% angle. Price subsequently traded to new lows with yesterday’s low bang on support from the 50% angle.

I have added Fibonacci retracement levels from the 2011 low to 2015 high and this low was right around support from the 38.2% level which, assuming this is the final low, keeps the overall bull trend in a strong position.

The Bollinger Bands show this low traded well below the lower band which is a common feature found at solid lows.

The RSI shows a bullish divergence at this low while the MACD indicator is still bearish although the averages have diverged somewhat and price rising from here will fix that.

Let’s wrap things up with the monthly chart.

NIKKEI MONTHLY CHART

Previously, I was much more bearish about this market but I’m prepared to put that on hold and favour further upside before it all falls apart again.

The pattern of trading since last year’s high looks like an ABC corrective formation.

The Bollinger Bands show this wave C low at support from the lower band.

Old tops often provide support in the future and this low is right around support from the 2013 high which is denoted by the horizontal line.

I have drawn a Fibonacci Fan from the 2008 low to 2015 high and this low is at support from the 38.2% angle.

The RSI shows a bullish divergence at this low while the MACD indicator is still bearish so caution still needs to be heeded.

Summing up, the low set yesterday at 16017 was around some good support on all three daily, weekly and monthly charts and I believe that to be the end of the bear market that began in June 2015.

By Austin Galt

www.thevoodooanalyst.com

Austin Galt is The Voodoo Analyst. I have studied charts for over 20 years and am currently a private trader. Several years ago I worked as a licensed advisor with a well known Australian stock broker. While there was an abundance of fundamental analysts, there seemed to be a dearth of technical analysts. My aim here is to provide my view of technical analysis that is both intriguing and misunderstood by many. I like to refer to it as the black magic of stock market analysis.

Email - info@thevoodooanalyst.com

My website is www.thevoodooanalyst.com

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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