End of correction for Nikkei 225?

End of correction for the Nikkei 225?

Technical chart of the Nikkei 225, the leading stock index in Japan

Source: tradingview.com

The Nikkei 225 has seen several strong days after bouncing from the support level at 27 000. During the last trading days, it looked like the price will stop at the upper border of the Envelopes (see technical chart above). However, there was some tailwind from politics today which led to another strong trading day.

In my version of the technical chart, the Nikkei 225 stopped at the limiting trendline. When looking at the Envelopes, the index is now overheated. The next two treading days will show if the Nikkei 225 will keep its momentum and overcome the limiting area. If so, and if confirmed by another candle, the index will have some potential to maybe 30 700 on the middle timeframe.

However, with a distance of roughly 5,7% from the SMA 20, it is unlikely that the index will continue at this speed. 

Market Breadth Data for Nikkei 225

The Advance Decline for Nikkei 225 line follows the current price development.

The Advanced vs. Declined data reached an extreme today, and chances are high, that on the next trading day the value for this "indicator" will decline.

The McClellan Oscillator for the Nikkei 225 raised to a new and high level.

The McClellan Summation Index for the Nikkei 225 continuous to be above the zero line and also reached a new and very high level on our chart.

 

For traditional investors, those are all strong bullish signals.

For some the risk-reward-ratio might be bad, though. The index is clearly overheated on the daily timeframe and a small set back or a pause in the small rally might be realistic. But let's also not underestimate the impact of the news we've seen today. It might be that the correction for this index will be over soon. For me, the correction will be over when the trendline (see first image with the technical chart) will be left behind.