KSE-100 Index: Formation And Indicators Suggest Correction To Continue; Indicators Generate Sell Signal On Weekly Chart

The Keystone for August 09, 2010

First support 10,256 points, second support 10,186 points; First resistance 10,394 points, second resistance 10,480 points

The index opened flat and remained in the red throughout most of the session. However it witnessed a sharp recovery in the second half and after touching its day's high, took to a downtrend to close in the red. Volumes were marginally up by 0.45% and stood at 55.99 mln. Average weekly volumes declined by 22.43% and stood at 62 mln, while the index declined 204 points. The index reacted from its critical resistance band which is between 10,430 points and 10,539 points and registered a lower high and a lower low. This suggests that the correction is likely to continue. Critical support stands between 10,050 points 10,120 points.

The Stochastic Oscillator on the daily chart maintains its downtrend while on the weekly chart has now generated a sell signal while being extremely overbought. Moreover the RSI on the daily chart has taken to a downtrend and maintains its sell signal as well.

The above factors suggest that the index has started on a corrective trend. Hence any upside should be capitalized upon to sell.

The first support is at 10,256 points and the second support is at 10,186 points. The first resistance is at 10,394 points and the second resistance is at 10,480 points.