The JP225 cash index is trying to register its fourth consecutive green candle but the rally seems to have halted temporarily at the June 16, 2023 downward sloping trendline. This is the third time that this trendline appears to limit the bulls’ appetite, allowing the formation of a bearish series of lower lows and lower highs.
In the meantime, the momentum indicators remain mostly on the bulls’ side. The RSI has made a higher high, but it appears to be moving sideways now. Additionally, the Average Directional Movement Index (ADX) is hovering comfortably above its 25-threshold, and thus signaling the presence of a bullish trend in the market. More interestingly, the stochastic oscillator has just entered its overbought territory, still holding a good gap from its moving average. However, this move could be a very early signal that the current rally could be close to its completion. In addition, a developing bearish divergence is casting a shadow over the recent JP225 index advance.
Should the bulls remain committed in continuing the rally, they would try to break above the June 16, 2023 downward sloping trendline. If successful, they would then have the chance to make a higher high and potentially test the June 16, 2023 high at 34,006.
On the other hand, the bears are trying to stage a reversal. They could try to defend the June 16, 2023 trendline, push the JP225 cash index below the 50-day simple moving average (SMA) and towards the 31,665-31,764 range. This region is populated by the 23.6% Fibonacci retracement level of the March 8, 2022 – June 16, 2023 uptrend and the 100-day SMA, and if broken it would give the bears the chance to record the lowest print since June 3, 2023.
To sum up, the JP225 index bulls are in control but the stochastic oscillator’s recent moves are raising questions on the viability of the current upside move.
