For last week we were observing if the bullish actions last April 20 would be supported by a follow through in bullishness by Monday April 25. The index did indeed create a significant white candle spread on Monday, but the value turnover was not as expected to ensure a bullish run. It was a mixed trading action where one day’s action is countered by another day’s action as seen by the interlacing white and black candles with varying value turnover. The lack of follow through by the index actually gives a higher possibility of a near major bearish action. As with last week, we have observed a negative divergence between the RSI and the index and within the week, another negative signal has been added with the MACD crossing below the signal line. So we are seeing more negative signals as the index moves sideways, which is definitely something we should keenly observe. I would suggest selling portions of your position for now to lessen your exposure in case a major bearish move happens. If more negative signals pops out, then the popular adage “Sell in May and go away” might come true.
FGEN has had a good run up since early March. All of the bullish trading days have been accompanied with large volume giving support to the bullish ascent. However for last week, we are starting to see some negative signs that this run up is near its end.
One of the negative sign is the volume on the black candles. We are starting to see increasing volume on the days when black candles were formed for last week. In line with that, on almost all cases since the run up from March, volume on black candles are usually lower than white candles that comes after it, which means that the negative action was countered by bullish actions the following day, accompanied with larger volume. This time around, looking at the trading for the last 2 days, the black candle formed last Thursday was accompanied with an increasing volume compared to the black candle volume last Tuesday. But the negative action last Thursday that was countered by bullish actions on Friday did not surpass or even match the volume of the black candle that preceded it. This is definitely a first sign of weakness.
Another negative sign is the negative divergence between the RSI and the stock. The stock has been moving higher for the past 3 weeks, but the RSI has not gained a higher high.
Although the stock still has the potential to move higher, I believe it might not be able to move higher than 15 if the stock continued to lose volume on bullish days.
For next week, observe the volume accompanied by next week’s trading. If the volume on black candle days increases while volume on white candle days decreases, start selling your position.
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