FKLI - 6/7/09 - Still no clear signal

Last week my 'stay out' and 'trade small' advice would had saved you plentiful of your time and efforts as this market really did not go anyway. Prices were caught within inside the Bollinger Band which is another sign that the market is caught up in a range bound situation. This is further being confirmed by the continuing falling ADX .

The next set of trading signals may come with price closing either above the upper Bollinger Band for longs or below the lower Bollinger Band for shorts. But if that comes without complimentary confirmations from other indicators like the ADX stops falling , I would suggest you to trade small first. Another set of more confirming signals should come with the Stochastic crossing down the 50 signal lines or the MACD falling below its previous trough as marked out in the chart. You should note that since the MACD is still relatively far away from its zero signal line, the common crossover sell signals used by many is usually unreliable. But as it is falling nearer to that zero signal line, the next signals should be more significant.

If a new buy or sell signal emerge, then use the top BBand less 2 ticks as your stops for the buys or the lower BBand add 2 ticks as stops for the sells. Since the dread MACD bearish divergence is still intact , I would more biased on the sell side.



The weekly chart again offers no confirmation on a bear cycle yet as the MACD is still positive and rising. While the Stochastic may has crossed down its own moving average, I usually would not pay much attention to this unless it crosses down its 80 signal line. The weekly candlestick is a spinning top which its small body means there was little price change. But when this appears during a rally or near new highs, this could mean that the bull may be losing momentum and spells trouble. So watch this closely:- if price closes below 1060 by coming Friday, then the bear may be in business.

Summary:- trade small or stay out as there is no clear signals. If trading, then you should keep stops tight or just take out if you can make 20-30 points profit.