The Nikkei is at a key level below which it would complete a large double top and suggest a more damaging selloff for the Nikkei and global equities more broadly, says David Sneddon and his team at Credit Suisse in London.
Sneddon notes that the Nikkei has fallen to key medium-term support at 22950 and he believe this level is likely to be a very good barometer for global financial markets amidst growing concerns over Coronavirus. He stresses the 22950 level is significantly important because a closing break below it would complete a large double top, which would suggest a more damaging selloff for the Nikkei and likely global equities more broadly (see Chart).
Below 22950, the next support level is at 22585 and then 22160/075, which includes the ‘neckline’ to the 2019 base, 200-day moving average and 50% Fibonacci retracement of the 2019 to 2020 upswing.
Update 5 February 2020: Sneddon is bullish unless a close below 22950 occurs. A break above 24090/115 would end the current multi-month consolidation for a test of, and then ideally a move above, the 24450 high of 2018, with potential trend resistance then at 25070 (see Updated Chart).