KSE-100 Index: Decline With Low Volumes Suggests Possibility Of Recovery; 200-DMA Tested

The Keystone for September 24, 2010

First support 9,800 points, second support 9,739 points; First resistance 9,922 points, second resistance 9,978 points

The index marginally positive however after touching its day's high, took to a steady downtrend to close in the red. Volumes declined by 22.52% and stood at just 39.41 mln. The index's decline came in with low volumes, which suggests that there is a possibility of a short-term recovery. Moreover the index tested the 200-DMA thus increasing the possibility of a recovery. The test is to see if a follow through occurs. If the index fails to do so, the index could come down to test its next support level of 9,400 points.

The Stochastic Oscillator has now become oversold thus adding credence to the above view of a recovery. On the other hand the RSI and MACD continue to show weakness with the latter generating a sell signal. This suggests that the recovery would be a short-term one.

The first support is at 9,800 points and the second support is at 9,739 points. The first resistance is at 9,922 points and the second resistance is at 9,978 points.