In my earlier posting on 9 Mar 14, I had mentioned that a false breakout was likely to happen and we needed to observe for 1 to 2 more trading days to confirm this. Indeed, the candlestick appearance didn’t look good on 10 & 11 Mar 14 (after my posting) and the Index fell strongly to close at 3,097 on 12 Mar 13. The drop continued and as at 14 Mar 13, the STI has reached the immediate support of 3,065 (Low of 3,060 and Close of 3,073) on 14 Mar 14. I have asked traders to take profit as early as 28 Feb 14 and reminded again on 9 Mar 14.
With the accurate forecast, I hope you have exited with some profit.
For the coming week, I would expect STI to be weak and consolidate between 3,065 to 3,120. For indicators, they have confirmed a retracement with MACD crossing signal, RSI failure break and volume dropping. If the current support at 3,065 failed, the next support is at 3,030.
photo credit: Baron Visuals via photopin cc
Sometimes, it is rather interesting to see what the reporters wrote. When you read the newspaper it is already too late. Rather useless and to the point of stupidity.
Correction, profit taking, retracement, you name it.
This shows that a stop loss and an exit plan is definately critical.
The question now is where is the support?
Try to understand this – a support is only a support when it is supported. Price action rules.
STI was very near to its upper resistance zone of 3,320 on Thurs 28 Mar 13. However, it was a red candle and indicators did not give any conclusion as the index has been moving sideway for the past few weeks. We will need to wait for price action to confirm a breakout of resitance or continuation of consolidation within a tight zone. Although the bearish divergence has been there for weeks, ultimately it is price action the rules.
HSI performs rather badly and seems to continue falling for the coming week with indicators hinting continuation of downtrend momentum. Its support is currently at 22,185. We need candles to close below this level to confirm a breakdown.
DJI seems to edge up above its resistance of 14,450 to 14,500. However, the red candle on 28 Mar 13 did not give us conclusive breakout. Volume did not have any significant increase for the past 1 week. We need to observe for 1-2 candles more. If breakout is confirmed, the next resitance is at 14,680 level. For trader who wish to have a quick in and out, you may enter at the point just as DJI breaks the resistance zone (14,500+) and set its stop loss below its recent low within the resistance zone (somewhere slightly below 14,450). This will provide a low risk entry. However, the risk reward ratio is not high as I next resistance is about 14,680.
SnP is currrently at is resistance level of 1,560 +/- 15 pts. CCI is turning up and MACD gives consistant indication. If this resistance does not hold, the next resistance will be at around 1,605.
Somtimes, it is rather dangerous to hear the news that says “S&P set record high” and investors jumped in. This is because the indexes may just hit its resistance that’s around the corner and retrace. I know there are many traders out there waiting to shot the indexes and they have waiting patiently for the past seveal weeks. As such, we need to thread carefully, especially when both DJI and S&P500 has been trending up for the past 1 quarter. The bear may be just looming around the corner.
If you take a look at CDL, you will know that it is of utmost importance as a trader / investor to lock in profit at the correct timing. This applies to traders of all time frames and even for long term investors. Those people who had bought into CDL in Nov 12 will have very good returns by end Dec 12. If they did not exit by the first week of Jan 13 and is still holding till now, then they are definately making a paperloss. This will further affect their trading psychology and if the counter continue to drop, say a few dollars, the persons holding the shares will sell it off in panic to confirm the loss. This kind of win-did not exit-lose then exit cycles happen everyday in the markets. Sad but true, we need these people to provide for liquidity and of course, provide profit for those 10% of the traders out there.