KSE-100 Index: Double Top And Bearish Formation Suggests Recovery Phase Nearing Completion

The Keystone for June 21, 2010

First support 9,580 points, second support 9,482 points; First resistance 9,691 points, second resistance 9,771 points

The index opened positive and after touching its day's high, took to a sharp downtrend to close in the red. Volumes were marginally lower by 2.25% and stood at 135.31 mln. Average weekly volumes declined by 7.21% and stood at 109 mln, while the index gained 174 points. The index's formation on the daily chart is a "Shooting Star" formation which suggests that the recovery phase of the index is nearing completion. Moreover the index has also created a double top at 9,820 points and closed in the red. This makes 9,820 points a formidable resistance level.

The Stochastic Oscillator on the daily chart is almost overbought, while on the weekly chart has given a weak buy signal. The RSI on the daily chart has started to stall, while on the weekly chart has shown marginal improvement, however has yet to generate a buy signal. Moreover the index failed to sustain above the 30-DMA, which is in a downtrend and in the near term is likely to cut the 200-DMA from above. This is bearish and suggests that the index's recovery phase is nearing completion while the overall trend remains bearish.

The first support is at 9,580 points and the second support is at 9,482 points. The first resistance is at 9,691 points and the second resistance is at 9,771 points.