KCPO:- The Selling Has Begun-2/21/2011

 

The market suddenly broke down last Wednesday when it opened below the upper Bollinger Band with the Stochastic and DMI turned negative. The MACD followed suit the next day and the Stochastic crossed down below its 80's signal line, thus putting all the initial sell signals in place.

Place stop at 3788 or at 3888 if your risks appetite is bigger.

With a picture perfect triple bearish divergence formed in chart, this sell down, if worked out properly shall be one of those shock and awe type of bear market. I am waiting for it to break below the lower Bollinger Band of 3677 which would offer the final confirmation of this super bear. And of course, the ADX's rising would confirm the selling power.
                      
 
Last week I was warning about the ADX getting above the DMI as a possible sign that the market may has gotten overbought. The correction comes swiftly as price has now closed below the upper Bollinger Band. But The Stochastic still stays above the 80's signal line and the MACD remains positive (though it is turning around fast). I would need to see the Stochastic going below the 80's or the MACD turning negative to call for a weekly sell. Meanwhile the ADX has begun dipping its head which is confirming the end of prior bull trend.

As I have always mentioned here in this column:- whenever many fundamental experts start to sing a song in unison, you should always start to consider taking an opposite trade.  CPO market has once again shown another real life example.