Nikkei 225 May Extend Losses Amid Global Stock Sell-Off


Talking Points:

  • Nikkei 225 falls amid risk-off sentiment, mirroring global counterparts
  • Significant highs still in reach, but near-term support levels need to be maintained
  • Risk trends and September consumer inflation data will dictate next moves

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The Nikkei 225 has recently lost almost 2,000 points since setting a 27-year high of 24,481.1 last month, succumbing to a broad-based global market sell-off. The Tokyo stock benchmark’s sharp decline dipped below the 9-day weighted moving average, breaking the bullish sequence seen for the majority of this year. Recent falls have brought the equity index back to levels seen in early September 2018, erasing over a month of impressive gains.

Nikkei 225 Chart (Daily)

Nikkei 225 May Extend Losses Amid Global Stock Sell-Off

Looking at a weekly chart may offer better cues to traders however. The Nikkei’s dip brings it back to support levels near the 19,880-22,400 range last seen twenty years ago. Recent negative RSI divergence could indicate consolidation or ultimately prove to have preceded bearish reversal.

Prices are currently eyeing near-term support, testing a June 2016 uptrend. The index will need to defend this range to keep bulls’ hopes alive amid the unravelling of global risk appetite. The absence of a clear-cut bullish reversal signal or a break through support confirmed on a weekly closing basis makes for an inconclusive setup thus far.

Nikkei 225 Chart (Weekly)

Nikkei 225 May Extend Losses Amid Global Stock Sell-Off

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Looking ahead, traders should keep a close eye on risk trends. Losses in American and European equities may echo into Tuesday’s Asia Pacific trading session, possibly bringing further daily lows for the Nikkei 225. Local inflation data for the month of September set to come out later this week may also influence the stock benchmark.

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