KSE-100 Index: Formation And Volume Suggests Short-Term Recovery; 200-DMA To Create Resistance

The Keystone for June 02, 2010

First support 9,231 points, second support 9,139 points; first resistance 9,366 points, second resistance 9,448 points

Analysis and Overview:

The index opened negative and continued well into the negative zone. It however posted a recovery and also turned positive momentarily but closed in the red. Volumes increased by 57.06% and stood at 95.05 mln. The index reacted from close to the August-December 2008 floor level of 9,187 points and recovered with improved volumes, creating a long lower shadow in the process. This suggests that a short-term recovery is possible however the 200-DMA is likely to create resistance.

The Stochastic Oscillator on the daily chart continues to fluctuate around the oversold region, while the RSI on the daily chart continues to show weakness. Moreover the MACD maintains its downtrend as well as its sell signal on the daily and weekly chart. Also the 30-DMA has cut the 50-DMA from above with the former likely to cut the 100-DMA from above.

This confirms the view that a short-term pullback is possible, with the overall trend remaining bearish.

The first support is at 9,231 points and the second support is at 9,139 points. The first resistance is at 9,366 points and the second resistance is at 9,448 points.