KSE-100 Index: Strong Closing With Volumes Suggests Recovery Phase Likely To Continue In The Short-Term

The Keystone for September 01, 2010

First support 9,758 points, second support 9,645 points; First resistance 9,898 points, second resistance 9,976 points

The index opened positive and remained strong throughout the session to close well into the green. Volumes showed a marked improvement of 122.83% and stood at 81.65 mln ? the second highest volume in August. The index managed to register a higher low. However what remains to be seen is if the index manages to close and subsequently stay above the 200-DMA. While there is a short-term recovery underway, avoid chasing prices and sell on strength.

The Stochastic Oscillator has shown a strong move to the uptrend and has generated a buy signal in the process, while the RSI has also shown a decent improvement. On the flip side, the MACD maintains its sell signal, while the 30-DMA, 50-DMA and 100-DMA maintain their respective downtrends, with a strong possibility that the 30-DMA and 50-DMA are likely to cut the 100-DMA from above.

While the recovery phase could continue for a bit longer, it is advisable to sell on strength as 9,900 points plays a critical resistance benchmark for the index.

The first support is at 9,758 points and the second support is at 9,645 points. The first resistance is at 9,898 points and the second resistance is at 9,976 points.