KSE-100 Index: Closing Below 200-DMA And YTD Low With Volumes Suggests Further Downside Risk

The Keystone for May 26, 2010

First support 9,357 points, second support 9,264 points; first resistance 9,508 points, second resistance 9,601 points

Analysis and Overview:

The index opened on a negative note and after touching its day's high, took to a downtrend to close significantly negative. The index maintained its downtrend and took resistance from its former support trendline and closed below the 200-DMA with volumes almost double; up by 96.69% standing at 135.44 mln. Moreover the index closed at its lowest level for the present calendar year (4th January, 2010 index's closing was 9,438 points). This is bearish and suggests further downside risk.

The Stochastic Oscillator and RSI on the daily chart though oversold are in a failure swing, while on the weekly and monthly chart maintain their respective sell signals. Moreover, the MACD maintains its downtrend as well as its sell signal on the daily and weekly chart. Also the 30-DMA is on the verge of cutting the 50-DMA from above with the latter now conforming to a downtrend as well.

The first support is at 9,357 points and the second support is at 9,264 points. The first resistance is at 9,508 points and the second resistance is at 9,601 points.