FKLI - Market Gets Silly Over QE Tapering - 9/23/2013

 

By following my trading plan, I bought in long position on last Thursday when price broke a new high. Again I am placing a stop at prior day low minus 2 points. This is especially so needed as the Stochastic has already reached the overbought zone. That is the mechanical system trading plan side of the story, the human emotion/feeling section would be I actually was laughing the market's reaction to the Americans' QE announcement as if the local equities market is definitely going to explode because of that. They always think as if Malaysia equities market is still the darling of the foreign funds.


As mentioned above, the Stochastic is inside the overbought zone. I am paying more attention to Stochastic because the ADX has turned flat. The oscillator indicator should be watched closely until ADX starts swing up and then it will be the MACD that we should pay attention to. The MACD remains positive and has now risen above its zero signal line. This is a bullish sign as the zero signal line usually define the bull and bear cycle. The DMI also remain positive and the D+ is spreading out, this is telling us the bulls are flexing their muscle. Price remains above the top band, everything in the chart are supporting the bulls. The ADX has stopped falling and turned flat, it may be signaling a possible new direction.

But the strange thing occurred on last Friday as the Japanese Candlestick is a shooting star/spinning top. When this appears near a resistance area, it usually mean the bulls may be having second thought or the bears are calling the bulls a bluff. My thinking is if the bulls feeling so strongly about the latest Americans' announcement of the QE, why did price retraced back near to the day's opening ?

Of course the Japanese Candlestick is not infallible, especially when they are used in the daily chart. I never trade by them but I would keep an eye on them as a warning/alert signs for possible market reversals, as in the current case.

 

The weekly chart gets increasing more bullish biased as the Stochastic has turned positive. The DMI also remains positive. The  MACD is still trying to turn around but it remains negative now. Price has now cleared above the middle band and went tested the top band, but it has not able to close above the top band yet. I have marked out 2 horizontal lines at the weekly chart, this is telling us that the market is basically within a large range since May this year. I would need to see price goes beyond the top line before I am convinced that the bulls are in command.