August futures closed lower by 11.0 point at 1261.5 on relatively low volume of 10,235 lots.
1. FKLI rebounded at the opening in response to a 286-point rally on the Dow the night before but the rebound was short lived.
2. Immediately after covering Monday’s runaway gap, FKLI corrected sharply after the first hour of trading and slumped all the way down to close even lower than Monday’s close, by 11 points, at 1261.5.
3. We remain short and maintain our buy-stop at 1314 OH at close to exit shorts but do not turn long as price is still below the Bollinger band.
4. We expect the FKLI to correct further downwards to test 1212 and then 1080.
5. Note that based on the Ichimoku chart, FKLI is already a short since 1326. The new Ichimoku resistance is now 1326.
General commentary: If the Dow’s 286-point rebound cannot “save" the FKLI from further weakness, our market is in really bad shape. Players’ sentiment right now in Malaysia is undoubtedly negative. As we expect further drops in the Dow, we expect FKLI to fall in tandem. Upside Fibonacci target 1466(Revised on June 15)
Ichimoku chart: (Based on Kumo (clouds) FKLI is now short. Kumo resistance is 1326. (Updated on Aug 6, 2007).
Average True Range for KLFE: A.T.R. is 33.57 points for FKLI futures. This implies you need to put a stop above/below this A.T.R. or you can get stopped out due to the volatility factor. We advocate a 1.5 x or 2 x the ATR. We are using a 5 days ATR.
