KSE-100 Index: Formation And Indicators Suggest Resumption Of Downtrend

The Keystone for June 10, 2010

First support 9,603 points, second support 9,520 points; First resistance 9,738 points, second resistance 9,805 points

Analysis and Overview:

The index opened mildly positive and after touching its day's high, took to a downtrend. However after staging a minor recovery and momentarily breaking even, resumed its downtrend to close in the red and around its day's low. Volumes declined by 10.26% and stood at 122 mln. The index registered a lower high and a lower low, while closing below its resistance trendline. This is indicative of the resumption of the downtrend.

The Stochastic Oscillator on the daily chart has now generated a sell signal in the overbought region, while the RSI on the daily chart has shown weakness. The 30-DMA has cut the 100-DMA which has also started to conform to a downtrend as well which is a bearish signal.

This suggests that the index is likely to resume its downtrend. The test is to see if the index holds above the 200-DMA (currently at 9,606 points). If the index closes below the 200-DMA, it could likely test 8,684 points which was from where it started its rally towards 10,721 points.

The first support is at 9,603 points and the second support is at 9,520 points. The first resistance is at 9,738 points and the second resistance is at 9,805 points.