Japan’s Nikkei 225 climbed sharply on Tuesday as investors bought shares that had fallen during the previous week. The index advanced 3.26% to 66,232.19, recovering part of a 6.4% weekly decline, its steepest in more than a year.
This analysis from MLGoldCorp.com examines whether the rebound can continue toward 67,000, or whether technology earnings and energy-market volatility could interrupt the recovery.
Bargain Buying Drives the Rebound
The latest move followed several difficult sessions for Japanese equities. Concerns about high technology valuations, rising oil prices, and artificial-intelligence investment had encouraged investors to reduce exposure.
Tuesday’s rally suggests some traders viewed the selloff as excessive. Market breadth was strong, with 187 Nikkei companies rising and only 37 declining.
The broader Topix index also gained 2.44% to 4,014.95, showing that buying was not limited to a few large technology companies.
Even so, the rebound has not fully reversed last week’s decline. Buyers still need to defend the latest gains.
The Daily Chart Begins to Improve
The Nikkei has moved back above several short-term support areas.
The 20-day Exponential Moving Average is the first indicator to watch. A sustained close above it would suggest that the rebound is gaining technical support.
The 50-day EMA provides a broader view. If the index remains above both averages, the medium-term structure should look more constructive.
A return below the 20-day EMA could indicate that the move was mainly a relief rally after a sharp selloff.
Image 1: Nikkei 225 Daily Chart With the 20-Day and 50-Day EMAs, Support at 65,000 and Resistance Near 66,200
RSI Shows Momentum Is Recovering
The 14-day Relative Strength Index has begun to improve after weakening during last week’s decline.
A move above the neutral 50 level would show that buyers are regaining control of short-term momentum.
A rise toward 60 to 65 could support a test of higher resistance without placing the index in clearly overbought territory.
If RSI moves above 70, the recovery may begin to look stretched.
Resistance Appears Near 66,200
The first barrier is around 66,200, close to Tuesday’s closing level.
A firm daily close above this area could bring 67,000 into view.
If the Nikkei clears 67,000, the next target may appear near 68,000. Beyond that, traders could look toward 69,000, although reaching it would probably require supportive technology earnings and stronger global risk appetite.
The main resistance levels are 66,200, 67,000, 68,000, and 69,000.
Support Remains Near 65,000
Immediate support is positioned around 65,000. A moderate pullback toward this area would still fit with the current rebound.
Below 65,000, attention may shift to 64,000, where buyers could attempt to defend the recovery.
Further weakness could expose 63,000. A sustained move beneath it would suggest that the bounce has failed.
Image 2: Nikkei 225 Four-Hour Chart With RSI, Support at 65,000 and 64,000, and Resistance at 66,200 and 67,000
Chip Shares Lead the Advance
Semiconductor-related companies recorded some of the strongest gains.
Kioxia Holdings surged 17.18%, Ibiden gained 11.03%, and Socionext rose 9.11%.
The rally also followed a strong performance from South Korea’s technology-heavy Kospi, which rose around 4.5% as Asian markets recovered.
The gains suggest investors have not abandoned the semiconductor sector. However, confidence remains sensitive to earnings because valuations and growth expectations are demanding.
Earnings Could Decide Direction
Attention is turning to second-quarter results from major US technology companies.
Market estimates suggest earnings for semiconductor and related businesses in the S&P 500 may rise 133% from a year earlier.
Strong results could support Japanese chipmakers and help the Nikkei hold above 66,000. Disappointing guidance may revive concern about whether spending on advanced computing can justify current valuations.
Lower Oil Prices Improve Sentiment
Brent crude eased by around 1.1% to $88.26 per barrel as markets responded to mediation efforts in the Middle East.
Japan imports most of its energy, so lower oil prices can reduce pressure on businesses, households, and the trade balance.
Supply risks remain. Renewed disruption could quickly push energy prices higher and weaken equity sentiment.
Trading Implications
The Nikkei retains a cautiously positive bias while trading above 65,000 and its short-term moving averages.
A confirmed break above 66,200 could expose 67,000 and 68,000. Stronger RSI readings would support that scenario.
A fall below 65,000 would weaken the rebound, while a break beneath 64,000 could return attention to 63,000.
Conclusion
The Nikkei 225 has recovered above 66,000 as bargain buying, stronger chip shares, and lower oil prices improve sentiment.
Resistance is positioned at 66,200, 67,000, 68,000, and 69,000. Support can be found near 65,000, 64,000, and 63,000.
The rebound is encouraging, but earnings will provide the next test. The reaction around 66,200 should show whether buyers can extend the recovery.
