Is The Nikkei At The Start Of A New Bull?
Alexandros Yfantis | Apr 21, 2016 06:15AM ET
Has the Nikkei ended a 3 wave decline? Highly likely. If that's the case, then prices should start moving higher in an impulsive pattern and target 19500 to end wave 3 which has just started.
Let's start with the longer-term chart, below, where I count the entire decline of late 2015 and early 2016 as wave 4. Structure suggests that this is a possible scenario as the decline is in 3 waves.
For this scenario to have increased chances of success we would also like to eliminate all chances that the bounce we are currently in is not another 2nd wave of lesser degree or a wave B. Unfortunately this can be confirmed only if we break above 20k. However If price continues to rise in an impulsive pattern, chances are that we are in a final 5th wave.
Below we take a closer look at the possible impulsive structure the upside move can take. The 161.8% extension of wave 1 brings wave 3 to 19500. Currently we only see 3 waves up, but this can unfold into something bigger to the upside as price is making higher highs and higher lows.
The Nikkei has broken the 1st downward sloping red trend line of resistance and I believe the bulls have a good chance of success at reaching the Kumo near 18300. However, beware. As the chart below shows, this could very well be wave B up before a new sharp decline for wave C.
The structure of the rise will clear things up regarding which scenario is most probable. For the time being, bulls are in control and I expect more upside to follow.
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