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Elixir Securities Limited – Elixir Grid

Karachi, January 08, 2018 (PPI-OT): KSE100 – Bulls Regaining Control?

The benchmark KSE 100 Index exploded higher last week after finding a sustained momentum above the descending resistance at 40,500/600 levels. The most recent breakout from a major consolidation zone has strengthened the bulls to target 43,000/ 300 projected breakout levels. This area also coincides with weekly 55 EMA and a horizontal resistance that could limit the upside in first attempt. Stochastic and RSI, on daily charts are already indicating overbought conditions signalling that sellers could hop in the down-trend sooner or later causing interim retracement to the support levels at 41,900/800 and 41,600/ 500 next.

However on a bigger picture, as the monthly chart shows, the benchmark KSE 100 Index formed a “Hammer” candlestick formation at the falling trend-line support last month. This particular candlestick pattern, when found at the lower end of a price swing, usually, but not always, precedes a reversal in the trend. There is indeed a follow-through in buying momentum at the start of this month which ultimately pushed the Index higher to 42,500 level thus breaking above the 50% Fib resistance ever since its decline from 47,241 (50% Fib of 47,241 / 37,736 larger descend is at 42,488). Stochastic and RSI are on the move up from oversold region, suggesting that buyers are taking control of the price action. Moving forward, ability to hold above 42,500 would be sign of termination of medium-term bearish structure with 47,000/ 250 levels in sight.