FKLI - Another Bear's Signature Implanted - 7/14/2014

The market flashed another new buy signal on last Monday as price closed above the top band with a positive Stochastic. As mentioned the previous week, I do not want to get too excited over it unless it can go above its recent high convincingly. I wanted to wait for another day to see what follows and price began to come out again.

On last Wednesday price came down below the top band again and stayed below it for the next day. Both the Stochastic and MACD went negative on the following day. I decided to take the new sell trade as it is more in line with the big picture which is bearish biased. Price has now closed below the middle band which is the de facto 20 periods moving average. This is a much monitored level.
The DMI remains positive but the D- has just crossed up above the 20's signal line. That would mean the sellers have begun to flex their muscle. If we can get a negative DMI or price below the bottom band, it would be a more assuring bear scenario.

There is a hard decision to be made here as where to place the stop. Normally at above the top band should be good, but in this case, the ADX is flat and low at below the 20's signal line, I would expect some flip flops before a real directional trend will kick in. So the other logical stop would be at above the recent high. Of course that would mean risking a larger portion of the trading capital. So if your account size is not too big, I would suggest to place your stop at top band.

The daily chart's indicators have just completed a new bearish divergence on top of those formed earlier. This is telling us that whoever wanted to hold up or push up the market is fast losing their script and the moment they decide to quit, the market will collapse fast.

 

The weekly chart remains almost the same as the previous weeks. The MACD, Stochastic and DMI remain positive. But there are signs of deterioration as the MACD seems to be turning downward. The Stochastic remains in the overbought zone but is forming a lower peak from its last. The D+ is also doing the same as its peaks have been lower and lower. Both these 2 indicators are hinting a lack of conviction from the bull. The Japanese Candlestick is a Spinning Top. When this is found near a new high area, it means a loss of momentum and as in the subtle signals from the indicators - bull may be faking it.

I continue to be bearish biased and getting increasing more. But I still need to see price go below the bottom band in order to welcome the return of a super bear. And there is always a chance that the power players may still want to push it up again.