Japan Nikkei 225 Experiencing Further Downward Bias

Nikkei 225 Index is expected to re-test its distribution range low at 20,400 level. The level is also a previous support level.

Supporting Claim for Downward Bias:
- Index Broke below its Uptrend Line (stride)
- Uptrend line has turned into resistance for index ( Bearish )
- Experienced 2x Upthrust (Failure to maintain new high). This potentially means that smart money is distributing at premium levels as "Breakout" traders buy in strength.

20,400 Level Objective based on:
- Previous support established in Mar 2018
- Fibo 1.618% projection

If Nikkei 225 Breaks Below 20,400 Level:
- Distribution Phase is deemed established and index will enter into MARK DOWN phase
- Next objective will be 19,000 level.

Having a Wyckoff Price Cycle concept in mind helps traders see the market from a structured prospective.

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Wyckoff's Law of Effort

Law of Effort Wyckoff's Law of Effort states that on any single trading day (or week depending on time frame), huge volume (effort) push by participants should see huge price movement, resulting in a wide spread (long body). This is a basic principle of effort and result. However, as per Singtel's case study, we saw huge selling volume on 11 May, yet the price action only shows a narrow spread (small body). This divergence of effort and result in Wyckoff's Law of Effort principles, indicates possible exhaustion in selling or hidden buying. Thus, with a lack of weakness, Singtel should continue trading range bound for the coming days or weeks till further strength or weakness is observed. Swing Traders who trades range can consider positions at 3.70-3.72, with exit target 3.76-3.78.

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