Olam – Struggling to stay above water

Trend: Downtrend, 20ma down, Macd below 0

Support: 2.50, 2.42

Resistance: 2.59 (100 & 200ma), 2.68 (20ma close)

Observations
Candlestick – Black candle.
Histogram – 3Gs. No Bullish divergence is seen.
RSI – Just entered oversold. No Bullish divergence is seen.
Stochastic –No Bearish crossover yet.
Bollinger Band – Closer to lower band.

Conclusion:
Olam recently had failed to sustain it uptrend and has been plunging rapidly recently as waves of bad news flowed the market. Recently, it seems that it is poising for a rebound but it got stuck in a tight trading range. Will Olam be rebounding or is it consolidating for further downside?
Olam’s trend had started to form a downtrend after it had broken the higher low support of 2.59 level. But what is lacking right now is a formation of a lower high to confirm the downtrend. Hence, there is a chance that Olam might rebound for a lower high which the rebound seems to be in a very tight range now. Looking at the chart closely, one could find that Olam is in fact forming a bearish flag formation currently. And at the same time it is test the resistance turn support level of 2.59. This resistance level of 2.59 is a very strong resistance level as it confluences with 100 & 200ma line. Based on the indicators, there are still no signs of bearishness yet except for the candlestick. Therefore, Olam might continue to test this 2.59 resistance level. If 2.59 resistance level is broken, it might face another strong resistance at 2.68 level.
If the bearish flag is confirmed with the breakdown of its lower line with high volume, immediate support of 2.50 level might not be able to withstand the selling pressure and price could break towards the next support of 2.42 level. This also confirms a formation of lower high for Olam.
In conclusion, Olam’s rebound is currently capped at 2.59 level which in fact had already reached yesterday. One could adopt breakdown strategy on Olam if 2.50 support level breaks with high volume. If the flag is being confirmed, there could be a potential downside risk towards 2.29 based on the flag projection.

What to watch out for this week:
1) 2.50 support level breaks with high volume
2) Bearish signal is being formed at 2.59 resistance level

Trading strategy to adapt right now:
- Short when 2.50 support level breaks with high volume
- Short when a bearish signal is being formed at 2.59 resistance level

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