KSE-100 Index: Formation Further Compounds Bearish View; Indicators Now Generate Sell Signal

The Keystone for August 24, 2010

KSE-100 Index: Formation Further Compounds Bearish View; Indicators Now Generate Sell Signal

First support 9,746 points, second support 9,675 points; First resistance 9,876 points, second resistance 9,949 points

Analysis and Overview:

The index opened positive, however after touching its day's high, took to a steady downtrend to close in the red. Volumes increased by 17.42% and stood at 50.83 mln. The index has created an Engulfing Bearish formation, which in an uptrend indicates a top and is all the more bearish considering the fact that Friday's formation was a "Hanging Man" formation. Moreover, the index has also formed a double top around 9,890 points, while also taking resistance from its downward channel's resistance trendline. This suggests that the index is likely to register a lower high and a lower low in each swing.

The Stochastic Oscillator on the daily chart has started to stall in the overbought region, while the RSI has started to show weakness. Also the MACD maintains its sell signal. On the weekly chart the Stochastic Oscillator maintains its downtrend while generating a sell signal and now the MACD too has conformed to a downtrend having reissued a sell signal.

The first support is at 9,746 points and the second support is at 9,675 points. The first resistance is at 9,876 points and the second resistance is at 9,949 points.