NIKKEI – Annual Review
Those who went long with us on Nikkei on June 29 captured a strong 32% advance. With 2025 now firmly in the rearview mirror, it is an appropriate time to reassess the broader technical landscape, review how the index progressed relative to expectations, and refine forward-looking targets. This Annual Review focuses on evaluating the current structure and determining whether any adjustments to the long- and mid-term outlook are warranted.
CANDLES
NIKKEI ended 2025 with predominantly bullish candles across all time frames. However, the 6M and annual candles ended way above BB, introducing the risk of sizeable pullback. I think that we should be ready that the index will backtest major supports of very long term frame sometime during the year. The pullback is estimated somewhere between 15% and 25%. There are slightly higher odds that this would happen in the late Q1 – early Q2 time frame (spring months).
The index started 2026 with a continued rally and there is no strong indication of a reversal yet.
CLASSICAL PATTERNS
Bullish Flag
The flag call on June 29 was spot on. The index reached both targets and has continued to move higher, advancing roughly 32% since the call.
ELLIOTT WAVE
Very Long Term
I found the ticker that provides data from 1995, and here is the first take. Based on some long term indicators, the index is likely developing a Cycle wave III, possibly wave 5 of III.
Last Wave
I combined the flag structure discussed at the beginning of December with an Elliott Wave count updated using the latest data. If these calculations are correct, the index still has roughly 5–9% upside to complete wave 5 of III. This advance could unfold over the next one to two months and may then be followed by a sizeable pullback, potentially as part of a Cycle wave IV.
SUMMARY
Nikkei 225 closed 2025 with broadly bullish candlestick signals across all time frames, confirming the strength of the prevailing trend. However, the 6-month and annual candles finished well above Bollinger Bands, introducing elevated long-term pullback risk. Classical chart patterns remain constructive in the near term: the flag structure identified earlier played out cleanly, with both targets reached and the index advancing roughly 32% since the June 29 call. From a candlestick and technical-support perspective, momentum remains intact and there are still no confirmed reversal signals.
Elliott Wave analysis aligns closely with this picture. Updated wave counts suggest the index is likely in the late stages of wave 5 of III, with an estimated 5–9% upside still available over the next one to two months. This convergence between candles, classical patterns, and Elliott Wave projections supports the case for a final advance before a more meaningful correction. The probability of a larger pullback, potentially developing as Cycle wave IV, appears higher in the spring months.
