Oct. 24 (Bloomberg) -- Japan’s Nikkei 225 Stock Average is poised for a short-term slump as it closed yesterday below the previous day’s open after opening above its close, according to Ayush Nagaraj, a sales trader at Sanford C. Bernstein & Co.
The gauge formed a so-called bearish engulfing pattern, repeating trends seen after recent highs on May 22 and July 18, said Nagaraj, who works in Hong Kong for Sanford, a division of New York-based AllianceBernstein LP. The measure slumped 20 percent from the May peak through June 13, and slipped 7.7 percent from July 18 through the end of that month.
“Sellers have wrestled power away from buyers,” said Nagaraj. “It’s probably prudent to take profits or sell now.”
The Nikkei 225 closed 2 percent lower at 14,426.05 yesterday, after opening up 0.5 percent. The gauge advanced 0.1 percent at the close on Oct. 22, after falling 0.1 percent at the open. The measure dropped yesterday after approaching an upper resistance level of 14,800 and may decline to 14,000 to test its 100-day moving average, according to Nagaraj. The Nikkei 225 gained 0.4 percent today.
Technical analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.
--Editors: Sarah McDonald, Tom Redmond