KSE-100 Index: Formation Suggests Breach Of 200-DMA Likely; Weekly Formation Indicative Of Top

The Keystone for July 05, 2010

First support 9,636 points, second support 9,562 points; First resistance 9,750 points, second resistance 9,803 points

Analysis and Overview:

The index opened positive and after touching its day's high, took to a steady downtrend to close in the red. Volumes were dismal at just 22.47 mln. Average weekly volumes declined to 51.78 mln, down by 33.71%. Moreover the index closed down by 99 points. On the weekly chart, the index's formation is indicative of a top as it took resistance from the 30-week average as well as its critical resistance of 9,865 points to close in the red. Additionally the index's formation on the daily chart suggests that the index is likely to breach the 200-DMA

The Stochastic Oscillator on the daily chart maintains its sell signal, while on the weekly char it is approaching the overbought region. Moreover the RSI on the daily chart has started to stall as well. Also, trend forecasting indicators have now turned bearish on the index.

As highlighted above, the index's formation on the daily and weekly chart is bearish and is indicative of a top. Hence any upside should be capitalized upon to sell.

The first support is at 9,636 points and the second support is at 9,562 points. The first resistance is at 9,750 points and the second resistance is at 9,803 points