The Nikkei has developed two powerful breakout patterns. The first pattern is the double bottom pattern. This is created by the low near 14,865 reached in February and again in June. This is a very bullish chart pattern and it is used to set a projected upside target.
The double bottom pattern is also sometimes called a W pattern. The distance between the base of the pattern at 14,865 and the peak of the pattern near 17,613 is measured. This value is then projected upwards above the W peak to give the long-term upside target. This target is near 20,347.
The breakout develops in two stages. The first target is a rebound from support near 14,865. The first target is 17,613. Traders expect to see some consolidation round this level before the market again breaks out in a new rally and moves towards the long-term target near 20,347.
The second pattern feature on the Nikkei chart is the down-sloping trend line. This line is calculated from the high in December 2016 near 20,012. The placement of the line is confirmed with the high in April and again in June. The close at 16,497 is above the value of the downtrend line and is the first signal that the downtrend has ended. This is confirmed with the recent close at 16,627 on the weekly chart. This is a bullish feature.