Last Friday 11th July, FCPO closed higher at 3,575 points right above the 61.8% Fibonacci retracement line. What is the market outlook for FCPO for this coming week? Overall mid-term trend is still bearish. How about short-term trend? This week, we will take a look at two different charts for FCPO. The daily chart for FCPO is showing a short-term bullish sign whereas the hourly intraday chart shows that the intraday bearish downtrend move might not be completed yet. Today, we have three guest speakers in this post, Mr. Chart Pattern, Mr. Fibonacci and Mr. Elliot Wave.
From the daily chart for FCPO, we are seeing three important points:-
- Chart pattern that is forming is a bearish rising wedge and it is a downtrend continuation chart pattern. Also, from the point of view of Elliot Wave, this rising triangle wave is a corrective move to counter the primary trend which is basically also bearish. So, we are having a mid-term to longer term of bearish view for crude palm oil futures contract.
- Both light blue and dark blue support and resistance lines have some validity to this commodity market as we can see twice that the lower light blue support line was tested and rebounded faithfully. As of last Friday, crude palm oil rebounded and closed above the dark blue resistance line and that suggests short-term bullish move.
- From the Fibonacci Time Series, the 89th trading day since March 4th falls on the July 9th which signals a potential trend reversal day. We also saw that the CPO rallied from that day onwards. Again this also signifies that the short-term market outlook for crude palm oil is bullish.
It is confusing, isn’t it? Well, let us add to the confusion with the introduction of the hourly intraday chart for FCPO. I am just kidding. It should add clarity instead.
OK, what does the hourly chart says? Let me highlight two main points in this hourly intraday chart for FCPO.
- The Fibonacci retracement levels are validated many times and we saw the FCPO market reversed direction on those retracement lines consistently. The amazing Mr. Fibonacci had spoken. As mentioned above, the Friday CPO market also closed right above the 61.8% Fibonacci level. Surprised by this market phenomenon? Now you should believe that the market is a good teacher and there are laws that governed the financial markets just as the gravity law holds everything on the earth together.
- From the Elliot Wave point of view as indicated with the yellow lines, we already saw a single downtrend leg followed by a zig-zag corrective counter-trend move that ended last Friday. As we know some of the basic rule of Elliot Wave is that the corrective waves should either be a single wave or three waves and can be extended to more number of waves as in triangles. It will never be completed with two waves or five waves. Could the previous rally in this FCPO hourly chart be a starting of a new Elliot impulse wave instead of being a corrective Elliot Wave? It could be. So, to qualify as a new impulse wave, the Wave 3 must not break and close into the territory of Wave 1 and that would be at 3,518 points. So, for Elliot Wave Theory, we have two possibilities that the previous rally is a start of a new impulse wave or a corrective wave and the deciding battle would be at 3,518 war zone. Let’s wait and see how the FCPO reacts on this critical level. That is the confirmation that we needed before trading. Let me remind you that even if the FCPO closes at 3,650, it also doesn’t mean that it is an impulse wave because from what Mr. Elliot Wave is saying, it could be a flat corrective wave pattern. But if the FCPO intraday hourly chart shows us five waves up from here to close above 3,650 points, then we can be sure that is not Elliot flat corrective wave since flat pattern should have only maximum of 3 waves. Now you see?
Finally, here comes the conclusion to the above information. In multiple time frame chart analysis methodology that I used, I always give a heavier weightage to the longer term chart as the force of the longer-term trend is stronger. That means, monthly chart would weight more than a weekly chart and a daily chart weight more than an intraday chart. So, in the daily chart, we have short term bullish outlook as with the Fibonacci Time Series trend reversal day and closing above the dark blue support line while for mid-term to longer term is bearish as in the rising wedge chart pattern. The deciding factor will be at 3,518 to see if FCPO penetrate and close below this level. If yes, short. If not, long on dip. However, to be on the safe side, go for long only if FCPO can close above 3650 level with 5 waves up on the intraday chart. There is some margin of profits before the FCPO price move into our golden shorting area.
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July 14th, 2008 at 6:13 pm
FCPO Sept 08 contract closed at 3,524 right above the “possible” Elliot Wave 1 of the previous rally. However, no trading signal triggered yet. We just got to wait for tomorrow. The intraday hourly chart today have a 3 waves zig-zag downwards. That could be the corrective Elliot Wave 4 or a start of new wave down in an intraday hourly chart. All prices are at the pivot points just like usual.
July 15th, 2008 at 10:39 am
Short signal triggered as FCPO opened below 3518 zone.
July 16th, 2008 at 5:13 pm
Nice bearish move today. The reason for my call for short is because of the violation of the Elliot Wave 4 into the territory of Elliot Wave 1. That means that the previous rally was actually a corrective wave rather than an impulse wave. We still need the CPO to take out the 3439 previous lowest point to have confirmation that we are right on track.