FKLI :- Short Term Downside Again ? 28/6/2010

As I noted that since the ADX has been falling, so I think the last up move should be a short lived one. So the taking profit at previous day low minus 1-2 points was prudent for you to take out the long positions on last Tuesday.

I had engaged an initial shorts position when price went below the upper Bollinger Band a that was accompanied by a negative Stochastic. But price went back up above the upper Bollinger Band at closing. In order to limit losses, placing a stop above the previous day high plus 2 point of 1328 would be prudent.

The negative Stochastic may be falling through its 80's signal line which will offer sell signal. The MACD remains positive. Contradicting indicators are classic evidence that the market is range bounding. But since the ADX has been falling and now gone below the 20's, I would pay more attention to the Stochastic for short term trading. 

The weekly chart's Stochastic has turned positive but the MACD remains negative. A repeat of a contradicting indicators as in the daily chart. The ADX continues to fall and may goes below the 20's soon which is also confirming the lack of trend here. Again I will watch out for price to close outside the upper or lower band to determine the market's next new directional move.

As mentioned last week, the 2 items to watch out here are the bearish divergence at the MACD and a possible formation of very bearish Head & Shoulder pattern.