FKLI - Another breakup, but I remain cautious - 14/9/09

All the indicators as per the previous week were contradicting and lack confirmation of a new trend. So I decided to use its prior high and prior low and mark out 2 horizontal lines on the daily chart to monitor for any new development. Last Monday this market finally broke out above its prior high and went higher.

The MACD finally goes into agreement with the Stochastic which both are now rising. At the same time the previously falling ADX has now begun to rise. But I am still have some reservation on this move as it is already very near to the 1,250 target and the Stochastic has already gone to 92's. But as long as the bearish divergence is not erased, I would continue to exercise extreme caution. And if price starts to collapse , this would mean a third bearish divergence in formation which is even more extreme bearish.

But as any divergence may show up in any chart, it does NOT mean that the market will collapse tomorrow. But we would HAVE to be get up on our toes to watch out for a major reversal. So since we are already in the long side of the trade, we will watch closely and let it run until it reverses and hit our stops. And our stop is at 1192.


The weekly chart is almost same as the previous week's. Other than the bearish divergence formed at the Stochastic, others still remain bullish.