Japan’s benchmark stock index, the Nikkei 225, trades lower as the Prime Minister prepares the country for its third state of emergency.
Japanese Premier Yoshihide Suga announced further measures are to be put in place to curb the spread of a new Covid-19 variant.
In force from today, the new controls will cover the jurisdictions of Tokyo, Osaka, Kyoto, and Hyogo. Restrictions will remain in place through May the 11th. With bars, restaurants, and entertainment venues closed over the Country’s annual ‘Golden Week’ holiday.
P.M Suga explained his rationale to reporters: “Perhaps the variant spread faster than we expected. That is why we are taking these stronger measures, focusing on Golden Week season, 29th April -May 6th”
The news dented sentiment in the Nikkei 225, sending the Index sharply lower on the week. Up until recently, the Index had looked primed to take a fresh look at 2021 (three-decade) highs at 30,700. For now, it seems we may be some way from achieving that feat.
Nikkei 225 price action
Last week’s price action saw the index break below the 50-day Moving average at 29,528. Losing a further 3.8%, dropping to 28,419 in the following two trading sessions.
The 100-day moving average at 28,585 proved good support, with the market recovering to finish the week at 29,020. Nestled between the 100 Day MA at 28,629 and the 50-day at 29,491, we are now likely to see a period of consolidation.
The market remains well supported below the 100-day. An ascending trend line, in place from the March 2020 lows offers support at 28,100. Above that, there is a horizontal trend line at 28,470.
To the upside, the 50-Day offers the first line of resistance. If the Nikkei 225 closes above that point, we target the ascending trend line from the 2021 highs. That sits just below the psychological 30,000 level at 29,962.
Traders may look to play the range, selling into strength and buying weakness as the market approaches these key support and resistance areas. However, a close above 30,000 or below 28100 would suggest the market is breaking out of the recent range.