As the chart shows, the Nikkei 225 stock index (Japan 225 on FXOpen) rose today to the 43,000-point level, thereby:
→ surpassing its 2024 peak;
→ setting a new all-time high.

Bullish sentiment has been driven by strong quarterly earnings reports from Japanese companies and expectations regarding the Bank of Japan’s monetary policy. Optimism was further reinforced by news of extended trade negotiations between the United States and China. According to Reuters, the decision to prolong the tariff truce between the world’s two largest economies by a further 90 days has improved the outlook for global trade.

Technical Analysis of the Nikkei 225 Chart

Earlier this month, we:
→ identified an ascending channel formed by price fluctuations in 2025;
→ suggested that bullish momentum would likely be sufficient to attempt a breakout above the 42k level;
→ noted that optimism might wane if the price approached the channel’s upper boundary.

Since then:
→ the channel has remained valid, as has the intermediate trendline (marked in orange) of the uptrend;
→ following a brief consolidation, the price broke above the 42,500 level on a long bullish candle.

However, the subsequent bearish candles appear to signal the start of a short-term correction, which is reasonable given the RSI indicator’s overbought reading. In this scenario, the correction could extend, for example, to the 42,000 level – a psychological mark where the 2025 high had previously been located.

In the longer term, a bearish scenario cannot be ruled out. Note the candle marked with an arrow: although it appears strongly bullish at first glance, the sharp surge could be linked to a buying climax and the beginning of a distribution phase (as per Richard Wyckoff’s theory).

Given that the index is at record highs, major market participants may use the positive news flow to lock in profits and sell assets at elevated prices. Confidence in this hypothesis would be reinforced if today’s sharp rise is soon reversed, signalling the bulls’ failure to maintain control at these record levels.

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