Monday, May 19, 2014

FKLI - Writings Are All Over The Wall - It Is Coming - 5/19/2014

The market flashed another new buy signal last Wednesday when price closed above the top band with the Stochastic turning positive. The signal was confirmed on the next day when price went above the signal day high. If a new trade is taken, place stop at below the top band. I would advocate an even tighter stop at the prior day low in the coming week. This is because the Stochastic has entered above the 80's level which is considered as the overbought zone since the ADX is low and below 20's.

The MACD, Stochastic and DMI are all positive but the chart seems to forming another bearish divergence now. So I would stay even more cautious .

The weekly chart's all 3  indicators stay positive. The Stochastic is inside the overbought zone and this is something I would want to keep an eye on as the ADX remains flat. The weekly chart is also having a bearish divergence formed. With that is forming at the daily chart, this is certainly something to watch out for.

Though the market continues to go higher, with a bearish divergence presence at both the daily and weekly chart, I remain cynical about the current up move. When I take up a new buy signal, I would keep a very tight stop and keep the number of contracts low. And I would of course give more weight to the sell signals. The writings are already all over the wall that we may be near a powerful bear cycle soon

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