FKLI - Stay long but stay cool headed - 19-10-09

The long trades went nicely last week as price continued to go up. By last Thursday, the upside target of 1250 has already been reached. At this moment, the MACD continues to be positive and rising while the Stochastic remains above its 80's signal line, and price stays above the upper Bollinger Band. The ADX is still rising which is telling us the trend is still intact. So everything remain rosy and I start look at 1390 as its next possible target.

But at these levels I would turn more cautious about the overall bullishness as 1,250 is the 61.8% retracement level for the whole prior down cycle. As we only had a bullish divergence at the daily chart but NOT in the weekly chart, so I would count the current bull cycle as a strong technical rebound in a grossly oversold market and not as a brand new bull cycle. The diminishing and smallish volume for the past week were NOT too convincing too. And with the multiple bearish divergence still in place, I think you should NOT be too carried away by the current bullish "recovery" talks.


The weekly chart remains bullish as the MACD is still rising while price stays above the upper Bollinger Band and the rising ADX means the current bull trend is still intact.

So as per last week's strategy, you should stay on the buy side but place your stop at 1238 or a tighter one at the previous day's low minus 2 points. If price closes below 1222, it would warrant a new bearish reading of this market.