Japan's benchmark stock index the Nikkei has had a great past one month rising more than 12 percent in the run up to the Japanese polls on December 16. On Monday, a day after the opposition Liberal Democratic Party won a comprehensive victory, the index hit an eight-and-a-half month high.
But the index has two resistance levels that cap the current rally breakout. The first resistance level is near 10,200. This is a shorter term resistance level that developed from the two rally peaks in July 2011 and March 2012.
The longer-term resistance is created by the peak high in February 2011. This high, and the low in March 2009 have created a very wide trading band. The Nikkei has been trapped within the confines of this band for three years. Recently, starting in July 2011, the activity has been defined by a narrow inside band with support near 8,300 and resistance near 10,200.
The current rally has a high probability of retreating from resistance near 10,200. The downside support level is near 9,000.