KSE-100 Index: Formation Indicative Of A Top; Indicators Have Entered Overbought Region

The Keystone for October 01, 2010

First support 9,957 points, second support 9,896 points; First resistance 10,054 points, second resistance 10,106 points

The index opened on a negative note however after touching its day's low around mid-day, took to an uptrend only to close in the red. Volumes increased by 92.81% and stood at 88.83 mln. The index has created a "Hanging Man" formation which in an uptrend is indicative of a top. Moreover it has created this formation around its 30-week moving average which is currently at 10,025 points as well as its short-term resistance trendline (blue line). This suggests that the uptrend is nearing completion.

The Stochastic Oscillator has now entered the overbought region and is at a level from where it usually reverses. Moreover the RSI too has leveled of and faces strong resistance from its previous top at 61.09 (14-D RSI). Hence any upside should be capitalized upon to sell.

The first support is at 9,957 points and the second support is at 9,896 points. The first resistance is at 10,054 points and the second resistance is at 10,106 points.