Sharp risk off theme in global markets

UK100 and JPN225, H4

Last Friday,  I wrote: European markets are heading for another weak day investors are cautious while digesting this week’s wealth of earning reports, with no appetite to push things further, especially with the EUR rising against the USD…..After UK100’s selling off seen yesterday, today strong negative momentum seems to be still in place…… Hence two contrasted position were taken today with entry at 7448.8. The first one is a Daily Short position with Target 1 above 200-DAy MA and at 50.0 Fibonacci level, at 7390.0, and Target 2 at 7350.0. Support is at 7520.0 and 7550.0. The 2nd position is an intra day position, with at Target 7470.0 and Support at 7420.0.” – Daily Short position but also intra day Long position, hit Targets on Friday and today respectively, with Net gain at +80 points. The Target 2 at 7350.0 still holds.

Elsewhere, the sell off in global stock markets continued in Asia overnight, with Japan underperforming and the JPN225 closing with a loss of -1.57% as a stronger Yen added to pressure from profit taking as the year end comes into view. Japanese GDP data also fed the risk-off vibe, as it undershot expectations at 1.4% growth in Q3, while uncertainties about the scope of the U.S. tax reform plan is another factor at play.

The JPN225 could likely start forming a downtrend, after the peak seen November 9 and with price action making lower highs for 4 consecutive days. The breach and break of the 20-Day MA and the 21900.00 support level today have increase the possibilities of a possible testing of the next support at 21800.0 which is also slightly above 38.2 Fibonacci level. A breach and break of the 38.2 Fibonacci level during the week, without signs of consolidation or retracement will add further negative momentum in the index. This can be consider as the point at which the JPN225 could possibly try to cover the 50% of the uptrend seen since August, at 21290.4, which is the next Daily support level.

The Daily Momentum indicators are drifting lower, with RSI falling below 50, MACD line still positive but with a slight acceleration lower and Stochastics at 27, sloping sharply downwards. Nevertheless, weekly chart is forming an evening star pattern, which if it confirms,it will add further bearish formation to JPN225. Hence with negative momentum still holds, a Daily / Weekly Short position taken , with entry at 21926.9. Target 1 was set at 21581.0, which is down to the gap seen on Japanese election on October 22 and also on the mid of 38.2 and 50.0 Fib. level. Target 2 is at 50.0 Fib level, at 21290.0.  Support levels at 22192.0-22265.0 and 22420.0 respectively.


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Andria Pichidi

Market Analyst


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