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Japan's Nikkei 225 Stock Average may decline at a more rapid pace after the gauge fell through a so- called support at 9,000 points, according to technical analysis by BGC Partners Inc.

As the attached chart shows, the gauge had managed to stay above the 9,000 point level for the past 12 months, according to Bloomberg data. The index declined 1.3 percent to 8,995.14 yesterday, breaking through that support. It opened at 8,904.44 today, its lowest level since April 2009.

“Chances of an accelerated decline have increased with the Nikkei 225's 12-month support breaking down,” Jamie Coutts, Singapore-based sales manager and technical analyst at BGC Partners, said in an interview. “We've broken through a very important support level. Investors should protect themselves from the downside by cutting their positions.”

The Nikkei 225 has fallen 21 percent from its 18-month high on April 5, sending the gauge into what some analysts regard as a bear market, as the yen strengthened and Europe's debt crisis and concern about slowing economic growth in China and the U.S. dented confidence in a global recovery.

The index may find an initial support around the 8,700 points level, Coutts said. That represents the 61.8 percent Fibonacci retracement from the April 2010 high, according to Bloomberg data. If that level is broken, the gauge may revisit the March 2009 low of about 7,000 points, the analyst said.

A Fibonacci retracement is created by taking two extreme points on a stock chart and dividing the vertical distance by the key Fibonacci ratios of 23.6 percent, 38.2 percent, 50 percent, 61.8 percent and 100 percent, according to Investopedia.com. Once these levels are identified, horizontal lines are drawn and used to identify possible resistance and support levels.

Technical analysts observe price charts to forecast resistance levels, or ceilings restricting further price increases, and support levels, or floors limiting declines. Such analysts use trading patterns and prices to predict changes in a security, commodity, currency or index.

Jamie Coutts Comments: Japan's Nikkei 225 Slump May Accelerate - Bloomberg Businessweek Online

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