Technical look at JAP225

Japanese Nikkei 225 (JAP225) has been the worst performing blue chips index from the Asia-Pacific region today, dropping 1.8% during the cash trading session. Declines have been broad with 32 out of 33 sub-industries in Japanese Topix index dropping. Rubber products sub-industry was the only one to close higher today, with a mere 0.03% gain. There was no specific news that could be seen as a reason behind the drop and today's pullback is reasoned as a profit taking following recent rally, especially in tech stocks.

The question now is whether the pullback will deepen or was it indeed just a brief period of profit taking. Taking a look at JAP225 from a technical point of view at H1 interval, we can see that the index dropped to an important support zone. A 31,725 pts area is marked with the lower limit of the local market geometry. A break below would, at least in theory, signal a bearish reversal of a short-term trend. In such a scenario, price could deepend declines and move towards the next support level in-line - 31,315 area that acted as a resistance earlier and which is also marked with a bullish trendline. On the other hand, should bulls manage to hold the index above the aforementioned 31,725 pts area, it could be a strong sign that the pullback was just a correction and the index may now look back towards recent highs above 32,500 pts area.

Source: xStation5