As the chart shows, the Nikkei 225 stock index (Japan 225 on FXOpen) formed a historic peak around 52,500 points only yesterday — but today it has fallen sharply, with losses at the session low reaching approximately 7%.

Bearish sentiment was fuelled in part by a slump in shares of Japanese investment giant SoftBank, which dropped by around 14%. The company’s heavy exposure to sectors linked to artificial intelligence and cryptocurrencies, both currently under pressure, has raised investor concerns.

The decline in the Nikkei 225 appears to be an extension of the sell-off in US technology stocks recorded yesterday, driven by a stronger dollar and growing fears of an AI-fuelled bubble.

Technical Analysis of the Nikkei 225 Chart

As shown by the 200- and 400-period moving averages on the 4-hour chart, Japan’s equity market remains in a long-term uptrend, with the widening gap between the two lines signalling an acceleration in growth. This supports the relevance of two upward channels:

→ a long-term channel, shown in blue;
→ an intermediate channel, marked by orange lines with a steeper gradient.

It is noteworthy that at the start of November, the Nikkei 225 entered the zone where the upper boundaries of both channels intersect – unsurprisingly, this confluence of resistance lines triggered a wave of selling pressure.

Key observations:

→ Sellers succeeded in pushing the price down towards the lower orange line, which acted as strong support, similar to the movement seen between 10–12 October (indicated by arrows on the chart);

→ Today, the price made a false bearish breakout below the psychological 50,000 level, forming a candle with a long lower shadow – a sign of buying interest.

Given the above, it is reasonable to assume that the market may attempt to resume its upward trajectory. Should this scenario play out, we could see signs of rally exhaustion, as the upward movement that began in April has already lifted the Nikkei 225 by more than 280%.

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