Saturday, August 16, 2014

FCPO - Even The Slightest Bullish Dream Is Completely Crushed - 8/18/2014

There are a few lessons to be learnt here. First there is the wrong interpretation of an oversold market with the Stochastic/RSI going down below 30's which is a mistake that many local chartists often make. As in the case here, the Stochastic has been 'oversold" since mid July, but it does not stop the market from going further down. Secondly, an "oversold" market does not mean that you can start "buying low", another common mistake that many stock analysts like to advocate. I use the ADX above the DMI as a more reliable confirmation of an oversold/overbought market which works most of the times BUT it does not mean it works ALL the time as the current situation demonstrates here. But I did not advocate "buy low", instead I insisted on the usual confirmed trading signal for a buy trade. I did not do any end of day trade on the previous Friday when price broke below its recent lows again because I earlier read the market as oversold. But since the ADX has begun to rise again since 8/8 again, I decided to try my luck and sold again on last Monday when price went further and went below 2231. I was not very confident of the trade and kept my stop at the entry price high immediately after entry and then to above the bottom band and now I have moved it to prior day high.

Whatever slight bullishness I have been reading in the past few weeks have now completed evaporated. It is the smallish bullish divergence is now been completely erased away.  But since the ADX is  still above the DMI and it is now at the extreme level of 44's,  I am still reading it as an oversold market . I would be very cautious of any shorts trade. Though the divergence at MACD is gone now, there is still one minor one at the Stochastic, so I would not get too carried away with the selling.

The weekly chart remains bearish as ever. The MACD continues to fall and the Stochastic is negative and stay below its 30's level. As long the Stochastic does not hook up and go back above its 30's level, do not harbor any foolish thoughts of a reversal. The DMI stays negative with the D- also as in the daily chart, it has now reached the 41's extreme level. So I would expect some form of consolidation and even some minor retracement from here. The ADX is still rising so the big trend is still intact. From the chart, I have marked out a horizontal line which show the current price has broken below a long term support of 2137's. This could be a really bad omen for the bull.

In the recent past, Jim Rogers and many market analysts were talking about higher prices for commodities which include food and oil. But it does not look like that is the case. Despite the wars in Syria, Iraq , Ukraine and many oil producing African nations, crude oil and natural gas price fail to go higher but instead has been falling. And now FCPO seems to be following that path. 

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