The Nikkei 225, Japan’s benchmark stock index, has posted a very impressive rally of more than 20% since its mid-October low. Part of that rally reflected the rebound in global equity markets after a brief correction and part was mainly related to the additional stimulus the Bank of Japan decided to provide on October 31st.
Today’s 17,455 level was last seen in October of 2007, the month when stock markets around the world peaked before the onset of the financial crisis.
The Ichimoku analysis is fairly bullish, although recent price action has moved far ahead of the cloud and the Kijun-sen (blue line), which could signal an overextended move. One possible area of support is the 16,445 level (previous resistance) as well as the kijun-sen and the upper cloud – both around 15,900-16,000.
There was a bullish cross of the Tenkan-sen (red line) with the Kijun-sen on October 31, but the fact that it occurred just inside the cloud moderates the strength of the signal. The Chikou Span should find support if there is a correction. The RSI is very close to overbought levels at 68.
Overall the move higher should eventually continue but there are also some signs the recent up-move is overextended in the short-term.