FCPO - Finally A Technical Rebound - 9/8/2014



My previous week's shorts trade was another "try out my luck" type as I have been maintaining that this market has been grossly oversold because:- (1) the ADX is above the DMI, (2) both of them are in extremity height and most importantly of all (3) was the Stochastic did not go lower but instead has begun to form higher trough. Price finally reversed and went back up above the bottom band which effectively closed off my shorts trade. I bought the market when price closed above the bottom band with the Stochastic turning positive. But if you are of the more conservative type of trader, you would only buy in the coming week when price can go higher than  2041 or the recent fractal high of2052. Though the MACD has already turned positive but it is relatively "far" from its zero signal line, so I would NOT get too overly excited about the current up move. The DMI remains negative but good news for the buyers are : the D- has now fallen below its 30's which mean the sellers have been losing their religion. And the ADX has begun to fall from its extreme high of 63's. This fall confirms the end of the prior trend.

The weekly chart begins to swift its allegiance slightly. All the indicators remain negative but the Stochastic has finally turned around and got positive, but it is still below its 30's signal line.  The D- has begun to fall from its extremity but the ADX is still rising, so the trend remains intact. But there is a new piece of extremely bullish sign and that is the weekly Japanese Candlestick. It has formed an Engulfing Bullish pattern which the current white candle's real body completely contain the previous week black candle's real body. As this is found at the current FCPO strong downtrend, it is an extremely bullish sign. Further we can also interpret the current Japanese candlestick as a Piercing Line where price went lower than the previous bar and then reversed and closed significantly higher. This kind of pattern is of one of those extremely bullish type. Of course I would much prefer to see price to go back and close above the bottom band as a more comforting confirmation.

As there is no specially bullish formation in the daily chart except a minor bullish divergence at the Stochastic, so I would NOT call the current reversal as a new cycle terminal reversal but I would just call it as technical rebound in a grossly oversold market.