• JP 225 index trades sideway after failing to overcome 78.6% Fibonacci
• Technical indicators are mixed but price is above moving averages

The JP 225 stock index (cash) is trading slightly below the 78.6% Fibonacci retracement of the July-August downtrend after the second false breakout since October last week. The 40,000 region is proving a difficult barrier to overcome. But it’s unclear if the bulls will be able to clear this hurdle in the near term.

The stochastics are trending lower but remain above the 50 neutral level, while the MACD is holding above its red signal line in the positive region.

Nevertheless, if the positive momentum strengthens in the coming sessions, a break above the 78.6% Fibonacci, and subsequently, the 40,000 level, is possible. Further up, the next focus would be the record high of 42,475 set on July 11 before the 123.6% Fibonacci extension of 45,334 is targeted.

However, if the price slips below the simple moving averages (SMAs), this would increase the downside risks, bringing the 61.8% Fibonacci of 37,847 into scope. A drop below the 61.8% Fibonacci would see the 50% Fibo of 36,418 being tested before the bears aim for the September low of 35,112.

In brief, as long as the index holds above its SMAs, there’s a reasonable prospect of another upside attempt, but sinking below it would turn attention to the downside, switching the neutral-to-positive picture in the medium term back to neutral.