FKLI -18/5/09 - Retracement ?

This market has again stalled and came down and took out our stops at 1006. The daily chart is getting a little bit worrisome for the bull as the Stochastic has already formed a bearish divergence with a series of lower peaks while the market went higher. This may be warning us that some strong selling may emerge soon.

And there are a few sell signals already in place. they are:- 1) the Stochastic has crossed down its 80's signal line which may be taken as an initial sell signal. 2) Price has crossed down through the upper Bollinger Band. 3) The MACD has crossed down its own moving average and 4) Most important of all is the ADX which has already started to drop while it is above both the D+ and the D-. This is usually a very solid confirmation telling us the prior trend has ended ( at least temporarily).

If you belong to the more conservative kind of trader, you may want to wait for price to close below 996 before selling. But if you are one of those more aggressive type, the above should has already given you 4 good reasons to sell. Keep 1023 as stops. As we still have not obtained any confirmation from the weekly chart, I would only assume that the current move as a retracement or a consolidation, therefore I would not want to sell too aggressively yet. This market may find support at 990 and 960.



Even though the D+ failed to cross up the ADX as what I mentioned I would like to see last week, the weekly chart MACD continues to stay positive and above its zero signal line while price maintains above the upper Bollinger Band, I have no reason to call the bull is dead. So we may monitor this chart for another week or so before deciding what could be its next directional move. As I notice there are still are many charts of stocks that are still begging for a major bull moves, so I think this could be too early to turn bearish. But of course for us technicians , what comes out in the charts dictate all.