The index continued its upward movement last week but stopped short of moving beyond the resistance line near 3970, which is also the 65 day MA line.
The upward movement was accompanied with large value turn over, but it was not able to sustain its upward movement and created a black candle last Friday.
Though the value turn over last Friday was relatively low, it is still a little bit worrying as the black candle formed is a hammer. A Hammer usually seen on the upward movement may mean a toppish situation. Hammer found on the top is a reversal sign; this however needs to be confirmed by further downward trading next week.
But even if we do not wait for confirmation of the hammer, there are some other indicators telling us of a bearish situation. First is the MACD, which has currently reached the center line or zero line. When an MACD coming from the negative starts to move upwards, the center line usually acts as a resistance and is not easily breached. Second is the RSI, which is also displaying bearish signal as it is near the 70 oversold level. Last is the stochastic momentum index (top chart), which has crossed below the moving average line.
With the recent disaster in Japan, this would definitely be a factor in next week’s trading activity and add to the bearish activity. Up until when would the downward movement continue is anybody’s guess? Next level of support is at 3700, hopefully that would hold.
GEO seems to have broken out of a falling wedge with a large spread and volume last Friday. However, GEO has a history of creating bull traps. Almost all of the previous white candle with large volume and spread always falls back to previous levels creating a bull trap. So for this recent bullish activity, exercise caution as this may be another bull trap, considering that the index maybe on its way down next week.
No comments:
Post a Comment