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Nikkei, Euro Stoxx Setting Up for Pullbacks?


The question is, will price head down impulsively or correctively?

The Nikkei 225 (INDEXNIKKEI:NI225) has poked its head slightly above a resistance region based on one of my firm's Elliott Wave counts. This is wave (iv) in the red count, which I am leaving on the chart for now, even though its probability had been greatly reduced. The much more likely scenario, shown in blue, is that price is completing wave a of B off the low.

This ideally means a pullback shortly in wave b of B, with an ideal target of roughly 14300, and then another push higher to the blue target box above in wave c. The ideal region for larger wave B to complete is between 15,145 and 15,425.

Assuming a clear 3 waves into that region, especially with negative divergence on the c-wave, this will set up another nice short opportunity.
Looking at the Euro Stoxx 50, the STOXX is through its .500 retrace as well, and looks like it wants to test the .618 retrace at 3085 next. This is important resistance here as well, which under all counts appears to be a good spot for a pullback.

The question is, will price head down impulsively, searching for a new low in wave C of the blue count, or will it only retrace correctively under the alt blue count or red count. Personally, I am leaning towards the latter at this point, so it is hard to suggest an outright short at 3085. If you do take it though, just please use a sensible stop.

You can always wait for the first micro 5 down to short with a stop above the high.

See charts illustrating the wave counts on the Nikkei and Stoxx here.

Garrett Patten is a technical analyst and chief educator for, a live trading room featuring Elliott Wave analysis on market indices and stocks. Mr. Patten's focus is primarily on U.S. and international equity indices, and demonstrating the capabilities of unconventional technical analysis. His articles appear on sites including MarketWatch and SeekingAlpha.

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