Just three days ago, Fortescue Metal broke above a long term resistance area. That looked promising. But the next day it didn't go on with the job. That rang alarm bells. Today, FMG lost 7.8% and fell back below the old resistance level. The fall was accompanied by very heavy volume. (Temasek sold its entire holding overnight. Temasek is the Singaporean Government's investment vehicle.)I'm not particularly interested in why things happen - just what the effect is technically on the charts. (So ... the reason FMG is down is because Temasek sold. But why did Temasek sell. Who knows?)
This is a negative event - with a capital N and a capital E.
The stock has broken below the Super Trend Line. The RSI is below the mid-line. The Daily Stochastic has broken below its signal line and below 80.
Given the negative sentiment in the market today and the nature of Fortescue as a bell-wether stock, this augurs poorly for the general market.
FMG still needs to break below the support of the long-term sideways consolidation before a bear market in the stock can be called.
But - a test of that level seems likely. That lies around the 6.30 area - Today's closing price was 6.63. So the critical level is only about 5% below today's close. Given that today the stock was down 7.8%, that level is not far away.
If FMG can break back above resistance, that would be a positive event. Chances of that seem remote.
Good luck
Red
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