FKLI:- Ride The Small Bull But Be Cautious - 10/17/2011

 

The market continues its upward move for the whole of last week. Now price has even broken up above the upper Bollinger Band which is a more comforting sign for the bulls. Since the ADX has been falling, I would pay more attention to the Stochastic which is now entering the overbought zone. If you want to be extra cautious, then I would suggest you to place stop at previous 2 days low minus 2 points as your stop. Otherwise place stop at 1418 which is the upper band now turning into support. When if the Stochastic is to cross down its 80's signal line, the market may resume its prior bear trend.

The MACD is fast approaching its zero signal line, if it can manage to cross up and stay up. It would signal probable return of a stronger bull. But looking at the DMI wiggling around each other, I kind of suspect the market may be going into a range soon.

 

The weekly chart has turned a little positive as the Stochastic has finally crossed up above its 20's signal line with price closing above the lower band. This is flashing an initial buy signal. The MACD though remains negative , it has begun to hook back up. This is signalling a reversal may be incoming soon. But I need to see more upward momentum in order for it to kill off the still rising ADX in order to call an end of the bear.

At this moment, other than a subtle and smallish divergence fond in the Stochastic earlier, there was not any major reversal sign. So I would still consider the current upward move as a technical rebound in a bear cycle. If this mini bull can flex its muscle further, then I would have to reassess the whole situation.