FKLI -  After Big Slam Down - Bears Take A Rest Before Resuming ?- 1/28/2013

 

Though the market "sneaked up" on me on the last Monday's sudden slam down. But by using the technical analysis to read the market, I was already on the right side of the market prior to the slam down. Right now I can either take my profit on last Friday when price went above prior day's high or I can choose to remain with the shorts trade by placing a stop at the bottom band plus 2 points.

The MACD has crossed down its zero signal line which is usually used to determine the bulls/bears zone. The DMI is negative with the ADX rising to 33's which is confirming the current strength. The Stochastic has already crossed up but I would not place too much emphasis on this yet as the ADX is at high level.
The market may just hang around these level before continuing its prior bear trend. The trading plan would be place a new short trade at below the prior day low minus 2 points to re-engage in the trend.


 
The weekly chart has turned bearish as  the MACD, DMI  and Stochastic have all turned negative. The ADX has begun rising though it is still way below the 20's signal line. The Japanese Candlestick has closed below the middle band which is effectively the 20 periods moving average which many traders pay attention to.

The most interesting item here will be the chart has just formed another bearish divergence with the MACD forming a lower peak while prices have been reaching newer highs. This market has already formed 4 higher highs while the MACD had failed to form higher peaks. I am getting increasing excited over this because the MACD is getting nearer to its zero signal line which  if breached, we usually should see a major sell off. I am watching the bottom band intensely as the final support. If that level fails to hold, then I think havoc should happen.

A bearish divergence happens when the bulls have exhausted their strength. With each push to a new high, the indicators are telling us that they are bluffing. When it happens at the weekly chart, it is telling us the prior big cycle has ended. As it is now, this is in line with the usual market psychology of selling down before an election when players are having doubts that the incumbent position looks fragile.