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Friday, November 28, 2008

Futures Trading Open Interest / 综合指数 2008年 11月 27日 / Composite Index 27/11/2008

Futures Trading Open Interest By Zhuge Liang

What Open Interest Tells Us
A contract has both a buyer and a seller, so the two market players combine to make one contract. The open-interest position that is reported each day represents the increase or decrease in the number of contracts for that day, and it is shown as a positive or negative number. An increase in open interest along with an increase in price is said to confirm an upward trend. Similarly, an increase in open interest along with a decrease in price confirms a downward trend. An increase or decrease in prices while open interest remains flat or declining may indicate a possible trend reversal.

Rules of Open Interest
Now, there are certain rules to open interest that must be understood and remembered.

1. If prices are rising and open interest is increasing at a rate faster than its five-year seasonal average, this is a bullish sign. More participants are entering the market, involving additional buying, and any purchases are generally aggressive in nature.

2. If the open-interest numbers flatten following a rising trend in both price and open interest, take this as a warning sign of an impending top.

3. High open interest at market tops is a bearish signal if the price drop is sudden, since this will force many 'weak' longs to liquidate. Occasionally, such conditions set off a self-feeding, downward spiral.

4. An unusually high or record open interest in a bull market is a danger signal. When a rising trend of open interest begins to reverse, expect a bear trend to get underway.

5. A breakout from a trading range will be much stronger if open interest rises during the consolidation. This is because many traders will be caught on the wrong side of the market when the breakout finally takes place. When the price moves out of the trading range, these traders are forced to abandon their positions. It is possible to take this rule one step further and say the greater the rise in open interest during the consolidation, the greater the potential for the subsequent move.

6. Rising prices and a decline in open interest at a rate greater than the seasonal norm is bearish. This market condition develops because short covering and not fundamental demand is fueling the rising price trend. In these circumstances money is flowing out of the market. Consequently, when the short covering has run its course, prices will decline.

7. If prices are declining and the open interest rises more than the seasonal average, this indicates that new short positions are being opened. As long as this process continues it is a bearish factor, but once the shorts begin to cover it turns bullish.

8. A decline in both price and open interest indicates liquidation by discouraged traders with long positions.. As long as this trend continues, it is a bearish sign. Once open interest stabilizes at a low level, the liquidation is over and prices are then in a position to rally.

In a nutshell



综合指数 2008年 11月 27日

如图中箭头A所示,综合指数反弹上扬,惟综指精确的在布林中频带(Bollinger Middle Band)这动态阻力线遇到阻力,这表示布林中频带将继续的成为综指接下来的阻力线。无论如何,若综指能上扬突破布林中频带的话,那综指将有望摆脱进一步下调的困境。

如图所示,布林频带(Bollinger Band)收窄12%,这表示目前综指基本上还是处于横摆巩固的格局,这意味着综指正在酝酿着一个新的趋势,惟这趋势将在布林频带再度打开时才浮现出来。




Composite Index Daily Technical Analysis 27/11/2008
As indicated by A, the KLCI rebounded on Thursday, but precisely resisted by the Bollinger Middle Band, which is still the dynamic resistance for the KLCI. If the KLCI should break above the Bollinger Middle Band, the immediate outlook for the KLCI would improve.

As shown on the chart above, the Bollinger Bands Width contracted another 12%, suggesting a lower volatility of the KLCI continues, which implies a consolidation. Meanwhile, the contraction of the Bollinger Bands Width also suggests that the KLCI is preparing for new direction, and the new direction shall be revealed once the Bollinger Bands Width re-expands.

As indicated by B, total market volume increased 94.5%, with volume above the 40-day VMA level. However, readers have to take note that roughly 20% of the total market volume are related from a single company, and therefore, the signal of volume above the 40-day VMA level is less significant at the moment.

Nevertheless, if volume should remain above the 40-day VMA level, it could help lift the market sentiment thus a better chance for the KLCI to break away from its consolidation.

As circled at C, the Stochastic breaks above 30% level on Thursday, leaving the short term bearish region, and signaling a technical rebound. However, in order to signal a short term bullish signal, the Stochastic would have to break above 70% level.

In short, the rebound on Thursday is a positive sign, but still, we need to wait until the Bollinger Bands Width to expands with the KLCI above the Bollinger Middle Band to confirm any bullish signal.




RESORTS @ 12.30pm 28 Nov 2008

KUB Andrew's Pitchfork TA

1 comment:

Ivan said...

SO , what does it mean with Resorts? graet to invest ?

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