KCPO:- Market Reverses Amidst Bear Talks - 10/17/2011

 

My stop was taken out on last Wednesday when price went above the lower band with a positive Stochastic. I have turned and bought the market base on the 2 confirmations. This is a real time lesson to be learnt here. Last week there were a few market commentaries by fundamental "experts" on how bearish was the KCPO market in the local media. But market instead of going further down, it reversed and pop further on Friday. The lessons to be learnt here:-(1) fundamentals is not tradable in futures market. (2) no matter what is your opinion on the market, place stop prior to placing trade and reverses your position when your technical analysis based trading rules tell you so regardless what others are saying.

The Stochastic has now crossed above its 20's signal line with price closed above the lower band. This is offering an initial buy signal. The MACD has also turned positive. The ADX has begun to drop from above the DMI, this is confirming the end of the prior bear trend. Since the MACD remains below its zero signal line and the DMI is still negative, I would read the current market as another technical rebound until the market can provide more convincing upward momentum to confirm a new bull cycle. Meanwhile place stop at 2803 or 2830. This depend on your risk tolerance appetite.

 

The weekly chart is of contradiction. The Stochastic has turned positive and moving up. The MACD and DMI remain negative. The ADX is still rising . Price is still below the lower band. So there are 3 against 1 in favor of the bear. The only possible "bright " spot here is the ADX has been above the DMI, a usual tell tale sign that this market maybe oversold. But as I always warn here, an "oversold" market may remain oversold for a long period and we may see price continue to go lower and lower. But I would keep an eye on this kind of situation that may possibly develop into a reversal. In another word, this is something for you to keep alert BUT NOT a signal to place a new trade.

Many of the international commodities seem to be staging a similar rebound. All in line with the optimism that has been floating in the markets the past week. But we must be careful as feeling is just a feeling, nothing more and they can change overnight. Other than America where we are beginning to see some positive economic development (like good car sales, new construction orders , railroad transport statistics and minor improving employment figures ) , we are NOT getting much good news from the EU and it is highly possible that they will continue to break more bad news onto the market in the near future.