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• The prior four days of the rally have reached an extreme overbought condition.


• Odds have increased for a minor pull-back scenario reinforced by the latest reading from the 4-hour RSI momentum indicator.


• Watch the 32,760 key short-term pivotal resistance with an immediate support zone at 32,120/31,620.

This is a follow-up analysis of our prior report, "Nikkei 225: Short-term positive momentum emerged ahead of BoJ" published on 30 October 2023. Click here for a recap.

In the past week, the Japan 225 Index (a proxy for the Nikkei 225 futures) has indeed staged the expected bullish reversal after a retest close to its 200-day moving average and 30,490/320 medium-term pivotal support zone.

It rallied by +6.85% to print an intraday high of 32,823 on 3 November and notched its best weekly return since March 2022.

Overstretched rally

Fig 1: Japan 225 minor short-term trend as of 7 Nov 2023 (Source: TradingView, click to enlarge chart)

The past four days of bullish impulsive moves have now reached an extreme overbought condition as depicted by the 4-hour RSI momentum indicator with a reading of 82.84 printed yesterday, 6 November, its highest level since 17 May 2023.

Right now, the RSI indicator has just exited from its overbought which increases the odds of a minor pull-back towards the 20 and 50-day moving average region.

Watch the 32,760 key short-term pivotal resistance

If the 32,760 pivotal resistance (also the minor swing highs area of 25 September/12 October 2023) is not surpassed to the upside, the price actions of the Japan 225 Index may undergo a minor corrective pull-back towards the immediate support zone of 32,120/31,620 (50% Fibonacci retracement of the recent swift up move from 30 October low to 4 November 2023 high & the 20-day moving average) before a potential new bullish impulsive up move sequence unf0lds.

However, a clearance above 32,760 opens up scope to see the next intermediate resistance coming in at 33,410 in the first step (the medium-term descending trendline in place since the 19 June 2023 high).