Jap225_m squeezed into “symmetrical triangle”

<p><strong>By <a href="http://investmacro.com/contributors/contributor-profile-forextime/">ForexTime</a></strong></p>
<ul>
<li>Japan&#8217;s benchmark stock index pares post-BoJ gains</li>
<li>This index could be en route to “5th distinct touch”</li>
<li>Friday&#8217;s Japan’s CPI release may be next volatility trigger</li>
</ul>
<p>&nbsp;</p>
<h3>Jap225_m, has not been immune from the pullback seen across global stocks over the past 24 hours.</h3>
<p>On the heels of the Bank of Japan (BoJ) maintaining its benchmark rate at minus 0.1% on Tuesday, while offering <a href="https://www.forextime.com/market-analysis/bank-japan-disappoints-yen-bulls">no guidance on a rate hike in 2024</a>.</p>
<p>Such policy signals, or the lack thereof, prompted the Japanese stock index <strong>to rally over 1000 points</strong> on the back of a<strong> weaker Yen.</strong></p>
<p><em>NOTE: The Jap225 index has an inverse relationship with the Yen, i.e. when one strengthens the other weakens.</em></p>
<p>&nbsp;</p>
<p>However, the Jap225_m then found <strong>resistance </strong>on a <strong>downward sloping trendline,</strong> when connecting highs of November 20th, 24th and December 19th, 2023.</p>
<p>As at the time writing, the daily candlesticks on the Jap225_m are finding <strong>support on its 21-day simple moving average </strong>which coincides with the <strong>38.2 Fibonacci level, at 33180.</strong></p>
<p><img fetchpriority="high" decoding="async" class=" lazyloaded" src="https://www.forextime.com/s3-static/users/user16/Jap225_mDaily%201.png" alt="" width="1000" height="800" data-entity-type="file" data-entity-uuid="642ddce5-5c17-4219-8f2c-31ea47e2b37f" data-src="/s3-static/users/user16/Jap225_mDaily%201.png" /></p>
<p>&nbsp;</p>
<h3><strong>From a fundamentals perspective …</strong></h3>
<p>Heads up, <strong>Japan’s national CPI is due this Friday (Dec 22nd).</strong></p>
<p>Economists are forecasting a <strong>2.8% </strong>year-on-year rise (November 2023 vs November 2022).</p>
<p>That 2.8% figure would be slightly lower than October’s 3.3% year-on-year number, but still above the BoJ’s 2% target.</p>
<p>&nbsp;</p>
<h3><strong>Jap225_m adhering to Bulkowski’s “symmetrical triangle” pattern</strong></h3>
<p>According to Thomas Bulkowski, in his book, “The Encyclopedia of Chart Patterns”:</p>
<p>“There should be at least <strong>five distinct touches </strong>of the two trendlines in a symmetrical triangle,… and each time making <strong>lower highs and higher lows.”</strong></p>
<blockquote>
<h3><strong><em>A 5th distinct touch may mean that Jap225_mmay break below the following potential support levels en route to 32333:</em></strong></h3>
</blockquote>
<ul>
<li><strong>33180:</strong> the 38.2 Fibonacci level which coincides with the 21-day SMA</li>
<li><strong>32969:</strong> the 50.0 Fibonacci level</li>
<li><strong>32758:</strong> the 61.8 Fibonacci level</li>
<li><strong>32570:</strong> the 50-day SMA.</li>
</ul>
<p>&nbsp;</p>
<p>However, if <strong>Japan’s CPI disappoint</strong>s markets, <strong>potential resistance areas</strong> for the Jap225_m could also reveal themselves at</p>
<ul>
<li><strong>33442:</strong> the 23.6 Fibonacci level</li>
<li><strong>33627:</strong> the upper bound trendline of the symmetrical pattern</li>
</ul>
<p>The <strong>Japanese index bulls</strong> (those hoping prices will move higher) will be looking for Jap225_m&#8217;s upward momentum to continue and print <strong>new multi-decade highs.</strong></p>
<p>For context, that intraday high on 16th June 2023, when the Jap225_m briefly broke above the 34,000 mark, was the highest level since 1990.</p>
<p>&nbsp;</p>
<p>Finally, <strong>volume can be seen decreasing </strong>through the formation of the symmetrical pattern.</p>
<p><strong>Increasing volumes</strong> around potential breakouts of this symmetrical pattern may be a <strong>pointer </strong>as to the next impulse move in the index.</p>
<hr />
<p><img decoding="async" class="size-full wp-image-54242 alignleft" src="https://www.investmacro.com/articles-analysis/wp-content/uploads/2014/07/Forex-Time-Logo.png" alt="Forex-Time-Logo" width="262" height="90" /><strong>Article by <span><a href="https://www.investmacro.com/contributors/contributor-profile-forextime/">ForexTime</a></span></strong></p>
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