Nikkei reversal risk with futures extremely overbought
Nikkei futures are extremely overbought on a 4h timeframe having surged to more than two-month highs earlier Wednesday. On each of the past five occasions RSI has exceeded 77, as it has today, it has coincided with a near-term market top.
By coincidence, today’s rally stalled at 39775, a level that acted as both supply and demand on multiple occasions earlier this year, including when last tested in April. While it goes completely momentum and comes just a few days before quarter-end, a short setup has presented itself.
Having missed an earlier entry opportunity when futures failed above 39775, I’m prepared to wait to see whether we get another test during the European or North American session.
If we were to fail again at 39775, you could initiate shorts with a stop above 39800 for protection. 39500 would be the initial target, a minor level that acted as resistance and support in April. Below, 39345, 39200 and 39025 are other downside levels to consider.
DS
By coincidence, today’s rally stalled at 39775, a level that acted as both supply and demand on multiple occasions earlier this year, including when last tested in April. While it goes completely momentum and comes just a few days before quarter-end, a short setup has presented itself.
Having missed an earlier entry opportunity when futures failed above 39775, I’m prepared to wait to see whether we get another test during the European or North American session.
If we were to fail again at 39775, you could initiate shorts with a stop above 39800 for protection. 39500 would be the initial target, a minor level that acted as resistance and support in April. Below, 39345, 39200 and 39025 are other downside levels to consider.
DS
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