Figure 1 is a weekly chart of the i-Shares MSCI Japan Index Fund (symbol:
EWJ). The red and black dots are key pivot points, which represent the best
areas of support (buying) and resistance (selling).
Before I make my comments about the chart, I want to state that I have little
knowledge of the Japanese economy, and that this analysis is purely technical
in its scope. However, price is the final arbiter for any issue, and price
often leads the fundamentals. So the ramifications of the "set up" are rather
significant.
A weekly close below the 9.33 level is bearish. 9.33 has been the support
level 3 times (see figure 1) over the past 18 months, and this area has importance.
In addition, a weekly close below 3 prior key pivot points is also very bearish.
I would look for prices to fall another 25% from these levels and eventually
test the next level of support at 7. This trade will not be realized if prices
remain above or subsequently close back above the 9.33 level on a weekly closing
basis.
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