FKLI:- Will There Be A CNY Rally  ? - 1/24/2011

FKLI  has now suffered some serious technical damage to its daily chart. The Stochastic is breaking down below its 80's signal line while the MACD has a negative crossover. At the same time, prices closed below the upper and middle Bollinger Band (the middle band is effectively the widely watched 20 periods moving average). All these 3 factors are yelling for a sell. I also take note that the ADX is now above both the D+ and D- and now has hooked down, this is a classic confirmation that the prior cycle has ended. I am also waiting for the D+ to go below the D- by the coming week, when if that happens, it will add on another sell signal.

Place stop at 1575.




The weekly chart may not has flashed any sell signal yet, but it has definitely turned XXX ugly. Though both the Stochastic and MACD remain positive and they have begun to hook down. So by the coming week, if prices continue to weaken, we should definitely see a negative crossing. The ADX has turned flat signifying the prior trend may has stalled. The Japanese candlestick pattern is also bearish as last week's was a small body with a long lower shadow which usually mean indecision after a large body white candlestick 3 weeks ago. The current week is large black candlestick that closed below previous week's low. When I read these 3 candlesticks together , I take it as a sell confirmation. But to have a more solid confirmation, I would watch price breaking below 1532 and a negative cross down by the Stochastic and MACD.

The bearish divergences which should be formed by the coming week is really going to be problematic for the bulls in this market. If you are in equities , then I think you should start taking profit on your portfolio, especially if you are holding those so called blue chips counters. If the bearish divergence is to played out accordingly, it would be an extremely profitable trade for the short sellers.