KSE-100 Index: Formation And Volumes Indicative Of An Adjustment To Thursday's Candlestick

The Keystone for July 19, 2010

First support 10,087 points, second support 10,020 points; First resistance 10,202 points, second resistance 10,267 points

Analysis and Overview:

The index opened positive and remained range-bound throughout most of the day. However after touching its day's low, took to a sharp recovery to close in the green. Volumes declined by 39.13% and stood at 55.70 mln. The index's formation serves as an adjustment to the overall trend. This is also confirmed by the fact that the index's volumes were significantly lower and also that the index registered a lower high and a lower low. Critical resistance stands at 10,260 points which is 50% retracement from the index's all-time high of 15,739 points and its post-floor low of 4,782 points.

The Stochastic Oscillator on the daily chart has maintains its sell signal, which makes Friday's formation a bearish divergence. On the weekly chart the Stochastic Oscillator is starting to stall in the overbought region. Moreover the RSI continues to hover around its resistance trendline (blue line lower portion) and is just below the overbought region.

Taking the above factors into consideration, upside seems limited. Hence any upside should be capitalized upon to sell.

The first support is at 10,087 points and the second support is at 10,020 points. The first resistance is at 10,202 points and the second resistance is at 10,267 points