KSE-100 Index: Short-Term Recovery Possible As 200-DMA Tested; Indicators Oversold On Daily Chart

The Keystone for August 13, 2010

First support 9,749 points, second support 9,658 points; First resistance 9,862 points, second resistance 9,918 points

The index opened positive and after remaining range-bound through most of the day, took to a sharp downtrend to close well in the red and around the 200-DMA. Volumes declined by 58.57% and stood at 25.54 mln (1st day of Ramadan, hence shorter working hours). The fact that the index closed around the 200-DMA suggests that a short-term recovery is possible. Critical resistance is placed between 10,070 (100-DMA) and 10,173 points, while support is placed at 9,790 points being the 200-DMA.

The Stochastic Oscillator on the daily chart has now started to bottom out while being well oversold, thus suggesting the possibility of a short-term recovery. The RSI too is approaching the oversold region and could lead to a short-term recovery. However on the weekly chart the Stochastic Oscillator has assumed a downtrend and has generated a sell signal in the process. MACD have conformed to their respective downtrends and in the process have generated sell signals.

The first support is at 9,749 points and the second support is at 9,658 points. The first resistance is at 9,862 points and the second resistance is at 9,918 points