The JP225 cash index has been on an aggressive upward path since the March 15 low of 26,457. It managed to break some key levels with relative ease, revealing the underlying strength of this upmove. The bulls will feel a lot better if the index achieves a higher high soon. Until this occurs, the current move could be seen as just a correction and hence a lower low could be on the cards next. Interestingly, the convergence of the simple moving averages (SMAs) is a typical sign that a sizeable move is imminent.
The overall technical picture is overwhelmingly positive for the bulls. The Average Directional Movement Index (ADX) is rushing higher, confirming the presence of a strong bullish trend in JP225. The usually conservative RSI is showing tentative bullish signs, but it is again overshadowed by the stochastic oscillator. This is moving higher, towards its overbought territory in a rather orderly fashion.
If the bulls maintain the market reins, their initial targets would be at the June 9, 2022 high and the Mar 29, 2022 high of 28,394 and 28,649 respectively. Even higher, the August 17, 2022 high of 29,229 appears to be very attractive from the bulls’ standpoint.
Should the bears regain market control, they would face the 23.6% Fibonacci retracement level of the March 8, 2022 – August 17, 2022 uptrend at 28,113 and the February 6 high at 27,852. If they successfully break these levels, a key support area will come next. The 27,370-27,601 range, defined by the 38.2% Fibonacci retracement and the 50-, 100- and 200-day SMAs, will probably put up a stronger fight.
To conclude, the JP225 bulls have been enjoying the rally. They have the support from momentum indicators, but an even stronger move higher is needed to achieve a trend change.