Just as I thought that the index would start to move upward, the index moved lower on the first trading day last week and created a gap down. The support-turned-resistance line connecting the troughs of Nov 30 and Jan 11, proved a strong resistance for the index. This somehow confirms that the breakdown last Jan 20 from the sideways channel (Nov-Jan) was not yet finished and it continued its downward movement last week. The sideways channel has a downward target of near 3760 which is not yet reached.
Another observation for the index though is the divergence that appeared with the trading action last week. A bullish divergence appeared, with the index moving lower connecting the lows of Jan 25 and Feb 01 and the RSI moving higher. This indicates an upcoming bullish activity, but there is no certainty as to when this will happen.
For next week, observe if the support holds, this is a major event to be observed for the reason that the current support is also the support line that is standing from Feb 2010. If the index goes below this support line, it would be a very bearish event and may start a long bearish segment similar to 2007-2009 bearish trend. However, if the support holds, we may see the index going towards 4052-4100 level.
The bounce from the RSI lows has happened for this stock. Amazingly, trading last Friday saw a white candle with a very large volume. No formation was broken so we could not say the target price. Upcoming resistance is near 3.38 which is the resistance of the downward channel. If the stock moves beyond the resistance line with large volume, this means we have a breakout of the channel. However, this is still far and unclear if the breakout will happen, so the immediate thing to do is lessen or sell near resistance.
FLI had a breakout from a downward channel with two white candle both with large volumes. The only problem is that if you were not able to ride this stock at its breakout price, there is not much room for profit as the target price is about 1.30.
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