Saturday, November 16, 2013

FCPO - Market Overbought,  So What? - 11/18/2013

Last week I did not engage any new short trade as price did not go below 2506. Instead on last Tuesday price went above prior day high , thus I bought in again. As mentioned last week, this market is grossly overbought as ADX is above the DMI, so I place my stop as tight as possible and it is at prior day low and it was stopped out on last Friday.

The Stochastic has turned positive again and began rising. So same for the MACD. So I would buy again on the coming Monday if price goes above Friday high. The DMI remains positive but take note that the gap between the D+ and D- has been narrowing and ADX turned flat, both a telltale sign that the market may not be as brave as it looks. The ADX remains above the DMI which is a solid confirmation that the market is overbought. But be it overbought or oversold, market can continue the flex more muscle and go up somemore. So one of the most important golden rules of trading and investment is :- never goes against the trend. Engaging shorts trade in the current market requires strong caution.

The weekly chart continues to favor the bull. The MACD keeps rising and it is now solidly above the zero signal line. The Stochastic is also rising but it has now entered the overbought zone. So do exercise some caution there as the ADX is just beginning to rise , so it is still NOT a strong trending market yet. Weekly Japanese Candlestick is a big white body candlestick but it is still unable to close above 2623. I would needed to see that happens in order to get a price formation that is breaking away from the current range. The ADX continues to rise and just has gone above the 20's level. This remains a positive confirmation that the prior cycle has NOT ended. The DMI stays positive. The market will need to stay around the current area in order to gather strength to make another push upward.

A minor retracement or a range bound market should be good for this market to build up more power for its next move. Any new short trade, if taken, should be with extreme caution (means tighter stop) . Regardless what the fundamental analysts have been saying, I remain firmly convinced that what has been happening in this market for the past month is merely a prequel for bigger thing to come. And I would not want to bother you with endless statistics on production, shipments and stock holdings, typhoons, wars and such.

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