After hitting its current 52-week high of 42,084 on last Thursday, 24 July (just a whisker below its current all-time high of 42,513 printed in July 2024), the price actions of the Japan 225 CFD Index (a proxy of the Nikkei 225 futures) have staged a minor corrective pull-back of -3.6%.
The three-day minor corrective decline sequence has reached a potential key inflection zone of 40,470/40,130 defined by a confluence of elements (the rising 20-day moving average, the 61.8%/76.4% Fibonacci retracement of the prior sharp rally from 22 July low to 24 July high) (see Fig 2).
In addition, the hourly RSI momentum indicator has just flashed out a bullish divergence condition at its oversold region, which suggests that the downside momentum of the three-day corrective decline has eased.
The odds now are in favour of the bulls for a continuation of another potential round of impulsive up-move sequence within its medium-term uptrend phase.
Watch the 40,130 key short-term pivotal support, and a clearance above 41,110 sees the next intermediate resistances coming in at 41,650, 41,940/975, and 42,513 in the first step.
On the other hand, failure to hold at 40,130 invalidates the recovery scenario for a round of corrective decline extension to expose the next intermediate supports at 39,455, and 38,940 (also the 50-day moving average).
