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by August 16, 2011 Brokerage

Karachi: KSE‐100: Decline with low volumes suggests consolidation

According to KASB Securities Limited,

• The index’s formation vis‐à‐vis its volume suggests consolidation. The test is to see whether the index is able to hold its double‐bottom at 11,077 points.

• The Stochastic Oscillator maintains its uptrend as well as buy signal, while the RSI continues to hover in the oversold region. This makes its formation a bullish divergence. In the short‐term, the possibility of a consolidation cannot be ruled out. The overall trend remains bullish.

• KASB Securities recommends accumulating on weakness.

Analysis and Overview:
Although, the index opened positive, however, after touching its day’s high in the initial hours, took to a steady downtrend to close marginally in the red. Volumes were extremely low and stood at just 25.90 mln. The index’s formation vis‐à‐vis its volume suggests consolidation. The test is to see whether the index is able to hold its double bottom at 11,077 points. Failure to do so would see the index testing its broader channel support trend line (lower maroon line) currently at around 10,900 points.

The Stochastic Oscillator maintains its uptrend as well as buy signal, while the RSI continues to hover in the oversold region. This makes its formation a bullish divergence. Other trend indicators are starting to turn bullish. In the immediate short‐term the possibility of a consolidation cannot be ruled out. The overall trend remains bullish.

KASB Securities recommends accumulating on weakness.

The first support is at 11,100 points and the second support is at 11,042 points. The first resistance is at 11,215 points and the second resistance is at 11,270 points.

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