FKLI - Maybe it is time for selling? 25/1/2010

Last Friday price hit my stop when the market finally reacted to what has been happening at DJIA(the whole Santa Rally gains wiped out in 3 days) . I have not been carried away by all those "we are already out of troubles" kind of blind optimism that has been surfacing the past few weeks. With the presence of a multiple bearish divergence, I remain very cautious as prices continue to break higher.

The current readings are that price has closed below the upper Bollinger Band which usually offer an initial sell signal. The Stochastic has already turned negative and if it is to cross down its 80's signal line, it would offer another sell signal. The MACD has hooked down but remain positive. If it crosses down, it would be forming another bearish divergence. The daily ADX has started to fall, indicating the prior trend has ceased.

Place stop at 1304. If it again manages to break its previous high of 1307, maybe the bull still has some breath left. But if it closes below 1288, I would be keeping an eye on a bigger bear.

The weekly chart still maintain its overall bullishness as the Stochastic is still climbing and price stays above the upper Bollinger Band. And so is the ADX which mean the current uptrend is still intact.But there is a very interesting item:- the MACD was turning upward last week where we were expecting it to cross up its moving average. But it did not, but instead is turning downward again. This kind of pattern is usually considered as a forewarning  of an extremely bearish occurrence. Please also take note the weekly chart has finally formed a bearish divergence as at now. This is usually confirming the end of the whole prior  cycle.

If you are still holding a large stock portfolio, especially of those big index related GLCs/blue chips. I think this would be a good time for you re-evaluate them.