Japan’s 225 stock index (cash) slumped by more than 2.0% to the lowest since May 13 in the wake of the news that Japan will resume the state of emergency in Tokyo ahead of the Olympic games.
The 200-day simple moving average (SMA) is currently under examination around 27,740 and near a key support region for the first time in a year as the RSI and the Stochastics dip in the oversold area. The rampant negative momentum in the MACD is also promoting additional bearish corrections.
Should the 200-day SMA give way, the sell-off could spiral towards the 27,000 level, while lower, the index may consolidate around 26,300 before another sharp correction takes place to 25,294.
On the upside, the downward-sloping trendline drawn from the March peaks will remain the key for boosting buying confidence towards June’s high of 29,474. If bullish pressures dominate from here, the index may push harder to go through the crucial 30,000 – 30,711 resistance region and print fresh multi-year highs near the 31,000 psychological level.
In brief, the JP 225 index is at risk of shaping another downside correction, with the confirmation coming around the 200-day SMA and the 27,740 number.
