KCPO - Will Bears Claw Bulls To Death ? - 3/7/2012

It was prudent to take profit with prior day low minus 2. And I have engaged some new shorts as price went below the top band with the Stochastic turning negative. As the top band stop is too near, so I would use 3288 as the initial stop. If price continues to fall, then I would use the top band as the new stop. The ADX has turned flat which is indicating the end of the prior buy cycle. When  if MACD and DMI turn negative, I would add on new shorts.



The weekly chart remains bullish as MACD, Stochastic and DMI stay positive. But as the ADX stays flat at below 20's, so we do not have any trend yet. I would need to see the ADX rises or the D+ goes above 30's to get really bullish about this market.

Summary:- the weekly chart is bullish but has no trend to push further. The daily chart has already flashed initial sell signal and may get some additional sell signals soon. An important formation just happened, with the last round of new highs, the MACD has failed to follow. So with the current down swing in prices, the MACD is forming a bearish divergence. So my game plan is to sell for the time being and add on more when more confirmations come forward. I always want to take advantage of a divergence as they are always a great profit churner when successfully materialized. A word of caution here:- the divergence is still in formation as the MACD has not crossed down yet.


 But I have an additional piece of evidence to support my thinking on the bearish divergence. And it comes from the currency market. As KCPO always has some reverse correlation with the US Dollars, I am of an opinion that the USD may be appreciating strongly soon. So I think the KCPO bears may have an upper hand over the bulls.