Elixir Securities Limited -Elixir Grid
Karachi, January 15, 2018 (PPI-OT): KSE100 – Short-Term Up-Trend Setup
The benchmark KSE 100 Index has carried on with its climb ever since breaking above the daily 100 EMA at 41,424 convincingly on January 3rd 2018 (Chart #1). Index is now moving above an ascending trend-line connecting the lows of price action on weekly charts (Chart #2). However, at this point, it appears to have encountered near-term resistance, prompting profit-taking activity and a correction opportunity to the trend-line; hence allowing the short-term oscillators to unwind from overbought levels.
On downside, immediate supports are placed at 42,563/430 levels while a break below that would turn attention to 100 days EMA at 41,620. Applying the Fib tool to the latest swing of highs and lows shows that the 38.2% level lines up with this area, adding more to its strength as a floor (38.2% Fib of 37,767/ 43,824 ascend). A larger correction however could last until the 50% Fib level or 40,795 level which nearly coincides with daily 55 EMA.
A bounce off from either support could lead to a revisit of 43,600/800. Sustained progression above this area would open further upside to the levels of 45,430/500 and 47000/200 next. This development will not only abandon the medium-term bearish structure but also put the Index on a stronger climb.
On a bigger picture, after printing a giant hammer candlestick at the falling trend-line support last month, the Index has undeniably shown a follow-through in buying momentum however it still reflects some concerns as the price action appears to be stalling at long-term 38.2% Fib resistance levels (38.2% Fib of 53,127/ 37,736 larger ascend remains at 43,615) (Chart #3). Thus, a bearish resumption scenario still remains possible. In that case, holding below 40,750/700 is necessary for this scenario to remain valid.