KSE-100 Index: Formation Suggests Uptrend Nearing Completion; Momentum Indicators Almost Overbought

The Keystone for August 23, 2010

First support 9,801 points, second support 9,730 points; First resistance 9,922 points, second resistance 9,984 points

The index opened flat and maintained a steady downtrend throughout the first half of the session. However after touching its day's low, it started to recover and closed off the session positive. Volumes declined by 22.57% and stood at 43.29 mln. The index's formation is a "Hanging Man" formation, which in an uptrend indicates a top. This suggests that the recovery phase is nearing completion. Critical resistance levels are 9,938 points being the 50-DMA and the 100-DMA which is presently at 10,047 points and declining.

The Stochastic Oscillator on the daily chart has become overbought, thus adding credence to the view that the recovery phase is nearing completion. The RSI has started to level off as well, while 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 9,801 points and the second support is at 9,730 points. The first resistance is at 9,922 points and the second resistance is at 9,984 points.