KSE-100 Index: Test Of 200-DMA Likely To Create Support; Indicators Cooling Off

The Keystone for September 23, 2010

First support 9,888 points, second support 9,831 points; First resistance 9,995 points, second resistance 10,052 points

The index opened marginally positive however after touching its day's high, took to a downtrend to close off the session in the red. Volumes showed a decline of 42.51% and stood at 50.86 mln. The index registered a lower high and a lower low to close below the 50-DMA. This is bearish, however, the 200-DMA (currently at 9,885 points) looms below which could create support.

The Stochastic Oscillator maintains its sell signal however has cooled off considerably and is now approaching the oversold region. On the other hand the RSI and MACD continue to show weakness. The test is to see if the 200-DMA holds. Failure to do so would lead the index to test its lower trendline which is currently around 9,400 points.

Taking the above factors into consideration, it is advisable to play the range for now.

The first support is at 9,888 points and the second support is at 9,831 points. The first resistance is at 9,995 points and the second resistance is at 10,052 points.