KSE-100 Index: Closing Below 200-DMA Suggests Trend Reversing; Momentum Indicators Overbought

The Keystone for June 22, 2010

First support 9,608 points, second support 9,557 points; First resistance 9,711 points, second resistance 9,774 points

Analysis and Overview:

The index opened flat and remained range-bound throughout the day to close marginally positive. Volumes declined by 50.47% and stood at 67.02 mln. The index has created a spinning top to close just below the 200-DMA. This suggests that the recent recovery phase is nearing completion and the index is likely to resume its downtrend.

The Stochastic Oscillator on the daily chart has now entered the overbought region, while the RSI on the daily chart has started to stall around its resistance level. Moreover, the 30-DMA maintains its downtrend and is on the verge of cutting the 200-DMA from above which would be bearish.

In summation, after forming a double top on the weekly chart the index has been witnessing pressure and is now hovering below the 200-DMA. This is bearish and suggests that the recent recovery phase is now complete.

The first support is at 9,608 points and the second support is at 9,557 points. The first resistance is at 9,711 points and the second resistance is at 9,774 points.