KCPO - Selling Continues - 5/13/2012

If you have followed the stops at prior day high plus, then you would have closed off the short trade on last Tuesday and then re-engage a new short on the next day when price went below prior day low. Or if you had used the lower band as stop, then you would not have to do anything. The difference between the 2 types of stops is that the prior day high is usually tighter and allow you to keep your profit or losses small but incur additional commission if market resumes its original trend. But as commissions are low these day, it would not really make much impact on our trading accounts.

The MACD is now solidly below its zero signal line which I usually to determine the bull/bear zone. Though the Stochastic is now below the so called oversold zone, but you should pay attention that the ADX has begun to rise. I would pay more attention to the MACD signal. But again, if you are worried about your profit, then use the prior day high plus method to mark your stop would be ok.


The weekly chart has turned bearish as the Stochastic has now crossed below its 80's signal line while the MACD has just crossed down its moving average which is flashing another new sell signal. Price has also closed below the middle band which is acting as a support. The DMI is narrowing and we may see a negative crossover by the coming week. I so, that would be another sell signal. If price continues to stay below the middle band , my earlier mid term bullish opinion on this market would has to be aborted because the monthly chart setup will change back to the bears.

In my opinion, the superiority of technical analysis over fundamental analysis is that when chart price actions change direction, we just switch our trading strategy accordingly. We certainly do not  stick to our opinions rigidly. Last week  there were a lot of bullish news about CPO in the media - low stock level, increased demands from overseas etc. All these are classic textbook economics about strong demand and low supply and should result in high prices. But yet in the real market, KCPO prices have been falling substantially. By applying technical analysis, I never bother to ask why, I just place trade accordingly to signals.