KSE-100 Index: Formation Suggests Correction To Continue; Indicators Starting to Stall

The Keystone for July 22, 2010

First support 10,174 points, second support 10,095 points; First resistance 10,294 points, second resistance 10,365 points

Analysis and Overview:

The index opened flat and after touching its day's high, took to a downtrend. Around mid-day it bottomed out and started on a recovery trend only to close marginally in the red. Volumes increased by 46.93% and stood at 118.68 mln. The index's formation suggests that the correction is likely to continue as the index once again took resistance from its critical resistance level of 10,260 points and despite breaching it intraday it failed to sustain itself only to close in the red.

The Stochastic Oscillator on the daily chart is gradually approaching the overbought region and any further rise would render it overbought once again. Moreover the RSI is also gradually approaching its overbought region.

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

The first support is at 10,174 points and the second support is at 10,095 points. The first resistance is at 10,294 points and the second resistance is at 10,365 points.