Friday, July 27, 2012
Bears win today
The bulls really got killed today. We opened very optimistically today, but again, we got sold down in the afternoon to close just at the 61.8% fibonacci retracement level. The major trends are still up, but momentum is down. It looks ugly, but I think any retracements should be a good buying opportunity. But please buy only the uptrending stocks on retracement. Support for the STI is now down to about 2971, which is also the level of the shorter term moving average. Strong resistance at 3030.
What do i mean when i say buy only uptrending stocks on retracement? Have a look at the chart of Wilmar above. I am showing a weekly chart to give you a better overall view of the major trend. This stock has been trending down since 2010, at a peak of $7.29. It did find some support at $6.00, then about $5.25 and after it broke $4.50, its downtrend suddenly accelerated. I do not know the reason for such weakness in Wilmar's share price, but to me, the only good way to trade wilmar is on the short side. Technically, resistance is around $3.88, but it looks like the stock is headed towards $2.94 (the next Fibonacci retracement level).
Here is a chart of Golden Agri, which is in a similar business to Wilmar, which is processing CPO (crude palm oil) into edible oils. I am only showing a daily chart here, but you can see from the relative position of the prices to the multiple moving averages, and also the recent price action, that it is on an uptrend and has been retracing for the past 5 days. Support is at 0.705, and today's price action looks rather bullish as it closed above yesterday's close. Support is at 0.705, with resistance at 0.78.
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