The Nikkei 225 is entering a consolidation period, represented by a triangle formation, following a 25% rally in just about two months. This rally has mainly been fueled by the efforts from the Japanese government to DE-valuate their currency. While it's difficult to know where and when it will end, there will soon be pressure from other countries, especially the US, to put an end to this.
The index stopped at 11005 two weeks ago, a value not seen since January 2010.
The Nikkei has historically shown more reversals than continuations when this triangle pattern has occurred; however, the Yen doesn't show any immediate signs of reversal.
A close below 10420 would be a good opportunity to go short. However, to be on the safe side, I would also be on the lookout for a swift move (as well as a close) above 11010 in order to take a long position. Whichever happens first will be a good opportunity.
Disclaimer:
Trading and investment carry a high level of risk, and CQG, Inc. does not make any recommendations for buying or selling any financial instruments. We offer educational information on ways to use our sophisticated CQG trading tools, but it is up to our customers and other readers to make their own trading and investment decisions or to consult with a registered investment advisor.
Anthony Cohen is a Product Specialist at CQG. He holds a diploma in Technical Analysis from the Society of Technical Analysts in London.
