Japans’s Nikkei 225 slumped 3.08% on Tuesday. Calls for a wider state of emergency leave the Index vulnerable to further declines.
Following Mondays Tech-lead sell-off in the US, the Nikkei 225 nose-dived -909 points to 28,608 and suffered its biggest losing day since February.
Japan is currently in its third state of emergency since the beginning of the pandemic. The government has imposed restrictions in four major prefectures, which Include Tokyo and Osaka.
The lockdowns were initially scheduled to be lifted on May the 11th. The worsening pandemic situation has now seen the controls extended until the 31st of May. Furthermore, many Governors have called for restrictions to be implemented nationwide.
The Nikkei 225 wasn’t alone in the sell-off, much as Asia-pacific followed the US lower on Tuesday, and both the Topix and Hang Seng also finished deep in the red.
Nikkei 225 Technical Outlook
The drop on Tuesday has pushed the index below both the 50 and 100-Day moving averages (29,335 and 28,789, respectively). The price is now testing the major support of a trend line at 28,365, which links the March low and the low of October 2020.
A close below the trend support could see the Nikkei 225 extend losses and put the market in danger of testing the 200-Day MA at 26,315.
If the market can recover the 100-Day MA on a closing basis, the upside target becomes the 50-Day MA resistance level.
The price may find additional resistance at 29,780, where a descending trend line in place from Februarys high, is located.
Nikkei Daily Chart
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