FKLI -  The Correction Comes - 3/18/2013

 

Last week I warned of that this market may be getting overbought and a correction may come soon. I was also advocating for a tighter stop. After reaching a high of 1668.50 on last Tuesday, the market was unable to continue upward. On the same day it came back down and formed a big black body Candlestick. I take this a warning and place a stop at the prior day low minus 2 points. And this stop was hit the next day.
Price went below the top band with the Stochastic turned negative. I engaged a new shorts position on the following day when price went below that signal day low. The Stochastic has now crossed down its 80's signal line. The MACD is making a turn but it still remain positive. A negative crossover would add more bearishness to the current shorts trade. The DMI has also turned negaive. Price has also closed below the middle band which is effectively a 20 periods moving average. This is adding more bullets to the bears.
I am placing a stop at the top band plus 2 points.
 

At the weekly chart, the Japanese Candlestick was mildly bullish last week because it was able to close above the middle band. But this week, the Candlestick went back and closed below the middle band which effectiely erases off whatever bullish hint. The MACD has turned downward again. Though the Stochastic has a bullish crossup, but  as it is way down there below the 20's, so I would not pay too much attention yet. As at now, we are having contradicting indicators and a falling ADX of 14's, all of these are pointing to a listless market.
As there is still no sign of a major trend developing in this market yet, I would continue to use the Stochastic to trade the market.