The Japanese yen rallied, while the Nikkei plummeted as geo-political risks rise after President Barack Obama authorized air strikes in Iraq. Tensions are also increasing between Russia and the Ukraine. The recent sanctions announced by Russian President Vladimir Putin may pose an economic risk to future earnings on some western food companies.
Another key catalyst was the disappointment that both the BOJ and ECB did not announce any new additional stimulus measures. The flow of easy money has supported higher global stock prices.
Price action on the daily chart displays both a daily close on the Nikkei daily chart and a breakdown of the 50.0% Fibonacci retracement of the last major rally from 13,905 to 15,810. With the fundamental risk drivers firmly in place, price may continue its bearish downturn and target the 61.8% retracement level at 14,636.
The trade: Sell Nikkei at 14,820, with a stop loss at 15,050, and a take profit at 14,650. The Risk/Reward Ratio is around 1:2.
Edward J. Moya
WorldWideMarkets Online Trading