Ascending Channel and Key Support:
- The price action is well-contained within an ascending triangle formation marked by higher highs and higher lows, starting from the lows in early March 2024.
- The 40,000 zone has been a horizontal support level, reinforced by the ascending trendline. The level was first a resistance that bulls tried to push through on three occasions before succeeding. Now it has turned to support and as long as that level holds, the bull case is strong.
Resistance Zone and Potential Breakout:
- YM is now testing a major resistance zone between 41,500 and 42,000, which has been tested multiple times since May 2024. This is basically because it is at an all-time high. The repeated test of this resistance increases the probability of a breakout, especially given the ascending nature of the channel. A daily close above 42,000 would signify a bullish breakout.
- Measured Move Target: Should the breakout materialize, the measured move based on the channel height suggests an upside target near 43,000–43,500.
Volume Analysis:
- Volume shows a slight increase during the recent upward move, but not significantly above average. The breakout attempt from this level ideally needs to be accompanied by a volume spike to validate the strength of the move. A breakout on low volume could indicate a potential false breakout, leading to a retracement back into the range.
Probabilities:
Bullish Breakout Scenario:
- If YM breaks above the 42,000 resistance on increased volume, it could trigger a momentum-driven rally towards the 43,000–43,500 target range. Traders would likely look to increase long exposure on a confirmed breakout, with stops set just below the breakout level to manage risk.
False Breakout and Reversal:
- Should YM fail to sustain a breakout above 42,000, particularly on declining volume, a pullback towards the 40,500–40,000 support zone becomes likely.
Trade Opportunities
- Long Positions: For traders looking to take long positions, waiting for a confirmed breakout above 42,000 with a volume surge offers a higher probability setup. Pullbacks to the 40,500–40,000 support zone could also be a strong entry point as a stop could be placed just below that level (around $40,000).
