Since the beginning of the year the Japanese index lost almost 4.0% but last week managed to rally in excess of 3.0% however the Japanese Index continues in a bullish phase since early October.
Last week the index rallied with a narrow range and closed near the high of the week, in addition managed to close above the previous week high, which suggests a strong bullish momentum. The index is trading above the 10-week moving average that should provide a dynamic support.
The stochastic is showing an overbought market however is still displaying a bullish momentum.
Expecting an upward move to a 2016 high at 18,975 on a break above the previous week high at 18,140 (scenario 1) however a bounce from a weekly resistance at 18,200 may push the Japanese index down to the lower end of the weekly resistance at 17,450 (scenario 2).