KSE-100 Index: Reaction From Resistance Level And Closing Below 200-DMA Suggests Resumption Of Downtrend

The Keystone for June 29, 2010

First support 9,608 points, second support 9,531 points; First resistance 9,734 points, second resistance 9,812 points

Analysis and Overview:

The index opened on a negative note and after touching its day's high, took to a downtrend to close well in the red. Volumes were marginally lower by 8.63% and stood at 81.46 mln. The index reacted negatively from its critical resistance of 9,860 points and took to a sharp downtrend to close at its day's low and below its 200-DMA as well as its resistance trendline (purple line). This is bearish and confirms the view of a top and the start of a corrective trend.

The Stochastic Oscillator on the daily chart has once again generated a sell signal after becoming overbought, while the RSI on the daily chart has started to show weakness after reacting from its resistance trendline. Moreover, the 30-DMA has cut the 200-DMA from above, while the 50-DMA has cut the 100-DMA from above. This is a bearish signal.

In light of the above, it would be prudent to capitalize upon any upside and sell on strength.

The first support is at 9,608 points and the second support is at 9,531 points. The first resistance is at 9,734 points and the second resistance is at 9,812 points