FKLI:- A Short Term Rebound But Get Ready For A Big one - 3/7/2011

Last week I thought the short trade taken would most probably turn out to be unprofitable due to the flat ADX. I was expecting the market making up and down short term moves . It turned out to be true and my 1,500 stop was taken out again. I went back in to buy the market on last Thursday. This time the move is also accompanied by a positive MACD.

Place stop at 1506.

With the ADX now has started to fall, I would consider whatever the current direction is, it should be of a  very short term. Last Friday's price movement was a typical example. Price went a higher  than its prior high of 1523 registered on 21/2/2011 but it failed to close above it. So I would place my stop tighter with each passing day. (like yesterday low minus 1-2 points). But if your risk appetite is bigger, then keep an eye on the Stochastic for exit signal.


                      


The weekly chart is of a classic sideway market. The ADX has now fallen below 20's and price is caught within the upper and lower bands.  Though the MACD remains negative , the Stochastic seems to be getting ready to turn around. If it becomes so, then we will have another classic sideway market confirmation, i.e. both indicators contradict each other. But I take note that the Bollinger Band has begun to "squeeze". If you have been following this column, you would know a "squeezing" band usually will bring forth some monstrous move soon. With the earlier mentioned bearish divergence in this chart, I would bet on the sell side. But of course, we should always await for the market confirmation on the new direction rather than stubbornly sticking to what we think.



There is a lot of fears in the market due to the explosive geo-politics situation. Every "experts" are telling you that oil will kill everybody. I append herewith a chart which you would draw a different conclusion. It shows very clearly that oil intensity of global GDP continues to decline. That is saying oil is weighing lesser and lesser on the global GDP. With most developed country possessing a 6 months or more of strategic oil stock (except China which only has 1 month worth of stock), any short term disruption can hardly harm the major economies.