NIKKEI Gradually turning bearish for the next 3 months.

27 mar

Nikkei (NI225) has given us one of the best long-term trades last year (May 26 2022, see chart below), as we gave a signal for the most optimal buy entry one could expect, on the 10 year (since October 2012) Higher Lows trend-line, and from 26000 it has now surpassed 40000:

The question is obvious: what do we do from here, especially after the remarkable bullish start to 2024? To answer that, we have to to go to the logarithmic scale on the 1W time-frame and observe the Channel Up since the June 2012 bottom.

The biggest fact is that the current bullish leg of the Channel (since the March 2022 Low), has already surpassed the roughly +63% magnitude of the previous two legs by +3%. This suggests that we are forming the current Higher High but the 1W RSI hasn't yet made a Higher High of its own, so the rally may be extended for a few weeks more.

What has been very consistent though during this 12-year Channel Up, is the tops as identified by the Sine Waves. The next Wave Top is on January 2025 and that would be the time to sell towards a 1W MA200 (orange trend-line) test again. Nikkei though has formed the previous Highs on Double Tops, so it is possible to make a 1W MA50 (blue trend-line) correction now and then rebound towards January 2025 for a Double Top peak.

As a result, we now turn bearish on Nikkei for the next 3 months, targeting 36000 and after the 1W MA50 holds, buy again for an end-of-year target at 40000, before the next correction/ Bear Cycle starts.


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