Wednesday, November 28, 2012

FKLI - Potential Reversal Signal (Nov 28)

Hi all.

In my previous post, I mentioned the reversal is near, & we shall wait for some candlestick reversal pattern to gives us the confirmation to ride the rebound.

After days of wash & rinse, finally, today we see a close in Bullish Engulfing candle. Indicators hooking up from oversold region & volume spike supported the bullishness of the day.

However, there's a risk of this being a part of a 3-candle-formation called the Bearish Three-line Strike. Although candlestick theory suggests it to be bearish continuation pattern, some experts back-test studies had show that it practically act more as a bullish reversal signal, instead.

Hence, the more defensive LONG can wait for a higher close tomorrow as a confirmation for the bullish reversal. A higher close tomorrow may gives us another bullish candlestick pattern called the Three Outside Up. That will be what I call a 'double-confirmation'... :D

The three patterns mentioned above:

Candlestick Patterns - Bullish Engulfing, Bearish Three-line Strike, & Three Outside Up (Nov28)

Technical analysis is a study based on historical data.
Assuming we find bottom at 1,590, the bull run, from 1,300 (Sept'11) to the recent peak of 1,678 (Oct'12), will still be valid. On FKLI, almost all correction in a primary uptrend had ended with either a hammer, or a bullish engulfing candle. 
I'm actually quite comfortable going long just based on the bullish engulfing candle today. 

That said, my wave count on FKLI, stating the potential end of a [5](5) primary wave, might still not be confirmed yet.  Not until we see a failed test of the previous peaks of: 1,650 | 1,660 | 1,678, & subsequent break below 1,590 level.

Here's a view from the 1,300 bottom to date:

Bull Run from 1,300-1,678 (Sept'11-Oct'12)

Given that December is almost always a bullish month, with its famous year-end rally, window-dressing, & with the GE still to come, I'm keeping a bullish stance on the FKLI in the coming month. 
Hence, I'll take today's close as the potential start of the bullishness to Dec'12.

If the reversal proves valid tomorrow, we will see a rebound of about 50points magnitude, based on the long-term channel supporting the 1-year bull run. End target at about 1,640-50.
However, I'm skeptical about a 1,700 peak by year-end, given the deep correction we just had. Even a retest of the 1,678 peak will be a surprise for me, seeing that there's only roughly 20+ trading days remaining. 

My near-term (Dec'12) outlook on FKLI:

FKLI - Dec'12 Outlook (Nov 28)

Embrace X'mas & New Year 2013 with some good profit in-hand! :)
Happy Hunting everyone!


  1. Left out a key risk:
    US politicians not able to reach a deal on the fiscal cliff issue by year-end.

    Based on today's (Nov 29) morning session, we are almost on course to a confirmed reversal from 1,590 bottom.

    Any negative comments/progress on the budget talk at Capitol Hill shall dominate the headlines ahead of the looming Bush-era tax cut deadline of Jan'13.

    Take note on that. Happy Hunting!

  2. Besides that, you check on Dow jones and S&P500 weekly chart , its MACD histogram has a huge divergence on this expecting to be a big drop after 5th wave....

  3. Actually most indicators on Daily & Weekly already hit new low, signalling lower levels ahead. Next LT support will be 1,520.

    But since the previous correction managed to reverse @1,590, we are 'theoretically' still within the uptrend channel since Sept'11.

    However, it's pretty obvious this is the (A)4 correction wave in a downtrend. Since the (A)2 wave is shallow, & we are in December, I believe this correction will be deeper, i.e. retrace higher, target 1,625-1,640.

    I expect Wave (A) to end around March'13, then we have the Wave (B).
    The huge drop will only come in Wave (C), my end-target for it will be 1,320-70.

    However, the correction wave will not be confirmed until we see a break <1,590 level. That's the confirmation part.

    Theoretically, investors can still hold stocks through December, sell by 3rd-4th week to avoid the Fiscal Cliff deadline frenzy, & avoid the (A)5 down-wave.

    After the GE13 next year, we will see Wave (B), which is a BUY. Period: Mar-end Apr'13.

    Barring any unforeseen circumstances,
    In May, we will usually see the 'Sell in May' prophecy in the US, which will drag down the global market sentiment. That might trigger the start of Correction Wave (C), which will be fast&furious & at least as long in length as the current developing Wave (A).

    I should really talk about this in a new post. I was thinking waiting for confirmation so that I don't induce unnecessary stress on stock investors in this Bullish December month. LOL.

    Before anything, just enjoy our Dec bullishness & X'mas & New Year 2013! Everything else can wait.


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