JP 225 analysis: after breaking the upper boundary of the sideways channel, the index re-entered the downtrend

After trading in a sideways channel, the JP 225 stock index broke through its upper boundary and then changed the trend back to a downtrend. The forecast for the JP 225 index for the next week is negative.

JP 225 forecast: key trading points

• Recent data: Manufacturing PMI was 49.7 in September
• Economic indicators: Manufacturing PMI is an indicator of business activity in the manufacturing sector
• Market impact: Manufacturing PMI below 50.0 indicates a decline in business activity, indicating a contraction in the sector and a likely downturn in the stock market
• Resistance: 39,625.0, Support: 37,235.0
• JP 225 price forecast: 35,080.0

Fundamental analysis

The Manufacturing Purchasing Managers' Index (PMI) for Japan for September came in at 49.7 (down from 49.8 in the previous month). This index is a gauge of business activity in the manufacturing sector and is a key economic indicator that shows the health of the economy.

Source: https://tradingeconomics.com/japan/manufacturing-pmi

A value below 50 indicates a contraction in manufacturing activity. This means that production in Japan is contracting, albeit slightly, from the previous month. A reading of 49.7, virtually unchanged from the previous 49.8, indicates a gradual slowdown in the rate of contraction, but still remains in the contraction zone.

This PMI level could signal that Japan's economy is facing difficulties in recovery, which could prompt a review of economic and monetary policy. This, in turn, reduces the investment appeal of Japanese companies and could lead to a sell-off in the shares of such companies. The forecast for the JP 225 index is negative.

JP 225 technical analysis

The JP 225 stock index is in a downtrend after breaking the upper boundary of the side channel, in which the quotes were for more than a month. However, it is difficult to say anything definite from the point of view of technical analysis of JP 225 though for the medium term. In the short term, the development of the downtrend is more likely.

To forecast the price of JP 225 we can distinguish the following scenarios:

• Pessimistic forecast for JP 225: in case of breakdown of the support level at 37,235.0 quotes may fall to 35,080.0
• Optimistic forecast for JP 225: in case of breaking the resistance level at 39,625.0, the index may rise to 41,550.0.

Summary

The stock index JP 225 is in a downtrend after breaking the upper boundary of the side channel, in which the quotes were more than a month. If the support level at 37,235.0 is broken, quotes may fall to 35,080.0. Manufacturing PMI for Japan for September was 49.7 points. This PMI level may signal that the Japanese economy is facing difficulties in recovery, which may prompt a revision of monetary policy.