The Nikkei 225 finds itself at the half-way point of the 20-year crash, based on the 1989 highs and 2009 lows. Is the index creating a topping pattern or a major reversal at this critical price point? Whatever this important index does at a key price zone could end up impacting stocks in the states and around the world.
Below looks at the Nikkei over the past 30 years on a monthly basis.
The chart above highlights that the Nikkei 225 is at its 50% Fibonacci retracement level of its 1989 highs and 2009 lows as well as testing its 1997 highs at the same time at (3). While testing this key retracement level, the Nikkei could be creating a bearish reversal pattern (bearish wick pattern) at (3).
While the Nikkei is testing what could be an important price point, London and France could be testing the tops of rising channels at the same time.
Last week, we noted that London and France could be testing 800-pound resistance lines.
The trends in the Nikkei, FTSE 100 and CAC 40 remain up, as one week’s price action does not change that trend.
One thing the Power of the Pattern looks for is price points that could lead to key inflection points. Bulls in Japan, London, France, United States and around the world DO NOT want to see reversal patterns/selling pressure at these potential price zones. If they did appear, it would not prove that the trends are broken but it would send a note of caution to the bulls.