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Saturday, February 29, 2020

WeeK 09-2020 Closing Notes

Corona scare continued to wipe out stocks markets globally sparing no mercy for KSE100 either. Index has hits its all time low of CY2020 and technical indicators have fallen to their lowest presenting a possibility of dead cat bounce. Although the index has posted recovery during last two trading days, it is not supported by trading data which rather shows capital drain from the market. 

WoW basis, average market capitalization has posted its highest drop of 2020 with literally neutral growth in last two trading days of week. 

Due to presence of multiple supports around 37900 +/- 100, this area may provide a cushion so downfall is expected to slow down here. But looking forward we expect the index to possibly retract in a "dead cat bounce" move with resistance falling in the range of 39800 +/- 100. Closing above 40500 +/- 100 is required to initiate possibility of trend reversal. Whereas, a continuous downfall may push the support zone lower than 37900-37700 +/- 100. 

Only expected positive trigger ahead is possible reduction in interest rate which should improve money flow into the market. However, the impact and public perception of Corona virus is difficult to judge. Therefore, our short to mid term opinion on market remains bearish unless there is substantial change to nullify this opinion. While Corona scare has played instrumental in pushing markets downwards, so far they have not broken out of their technical range and remain predictable. A market trading out of its technical range for too long can be depressing at best. 

Important dates ahead for MTB auction are Feb 26th, Mar 11th, 25th while there is no PIB auctions for the rest of Feb and entire Mar 2020.

(Update 02-Mar: Complete range of index resistance is 38900-39300-39800 +/-100. Complete range was missing due to typing omission. Thanks to our readers for pointing it out. )


Source:
  1. http://www.sbp.org.pk/ecodata/Auction-Bond.pdf
  2. http://www.sbp.org.pk/ecodata/auction-treasurybills.pdf 

Thursday, February 27, 2020

Week 09-2020 Corona Routs Global Equities

Week started with Corona epidemic triggering worst CY2020 sell off across global equity markets and KSE 100 was not spared. While index has honored its monthly EMA21 as intraday support, we only expect a corrective bounce before bear spell may continue. 

As per mention earlier (link here) index did break its lowest  intraday support of 38800 +/- 100 with rise in volumes but market capitalization tells a different story. 






DoD basis, Market capitalized is headed to worst ever drain off casting fear that bearish spell may return with strong fervor. Looking forward, we only expect the trigger of interest rate reduction by mid of March to provide any relief to the market. Otherwise it will be bear rally all the way to bottom once again. 
Expected support and resistance falls at 38800 - 38100 +/- 100 and 40200 - 40500 +/- 100 respectively. 



Friday, February 21, 2020

Week 08-2020 Closing Notes

We do not have much to iterate other than our previous remarks on support and resistance. Index is expected to remain unstable until it makes a cleat break above its resistance or below its support to settle down with healthy accumulation.

Support : 39800-39500-38800 +/- 100
Pivot :40600-40900 +/- 100
Resistance : 54650 - 41900  +/- 100



WoW basis, market cap has continued to lose value although current week losses are lower than out going week. Overall, it suggest that market is approaching its bottom exhaustion and fresh buying interest may trigger soon. 

Thursday, February 20, 2020

Education: Market Sine Wave Cycle

Market Sine Wave Cycle


Market works in a sine cycle, and market progression upwards or downwards does not happen in a straight line. However, investors tend to panic through the cycles and miss the correct buying phases or sell too early out panic. 

Wednesday, February 19, 2020

Week 08-2020 Mid Update

Market posted recovery after being range bound since the opening of the week. However, it remains to face 40600-40900 +/-100 tough resistance challenge which must break for clean upside, On bottom side index must take a clean dip towards 39500 - 38800 to reset the impact and start a fresh trend.

DoD basis, market cap began to improve for the first time in current week. Demonstrating fresh interest in buying. 



Overall, we expect market to remain range bound and sideways until it makes a clean reset. Patient investor shall utilize the opportunity to accumulate in stocks resting at bottom while avoid trading in sideways stocks until they break out in a clear trend. With roll over week ahead, it may be difficult to predict the market. 

Sunday, February 16, 2020

Week 07-2020 Closing Notes


Index posted resistance from our predicted range and remained correction bound for entire week. 




WoW basis, average market capitalization has continued to shrink subsequently for last four weeks. This does not represent a good sign for long term. 


Looking forward we expect market to remain under pressure and keep posting consolidation until healthy accumulation is achieved. Interim resistance and channel top remain valid as posted earlier ( link here )

Fear persist that index may once again hit the curse of 40900 +/-100 sideways resistance as mentioned here.

Major events falling ahead are PIB auction on 19 Feb and MTB auction on 26 Feb. Both of these events pose a risk of liquidity drain from the market.  

Wednesday, February 12, 2020

Week 07-2020 Mid Week Update

Index took a leap from lower band of predicted support range ( link here ) and posted strong recovery inline with our expectation. 

Major event today was SBP MTB auction ( link here ) but against the tradition, market remained strong in second half giving a confirmation signal to attractiveness of investing in PSX.



DoD basis, market cap has continued to rise since week opening, signaling the return of bulls to the index. The real impact will be observing positive week closing.




Looking forward, intraday resistance falls in the range of 40600-40900 +/- 100 points while index will face interim resistance at 41650-41900 +/- 100 points which may coincide with FEB-MAR roll over period. While this can be a frustrating sideways experience, it will also be an opportunity to sell on strength and accumulate on dip for smart investor. 


However, a swift break above interim resistance is required for bullish rally to continue. A frustrating previous experience was observed in Q4-2019 when index got painfully stuck in the range of 40900 +/- 100 ( link here ) We hope it will not be a repeat of same. We predict market channel top to fall in the range of 43800-44300-44800 +/- 100 points.

Wish you very profitable trading ahead! 

Sunday, February 9, 2020

Week 06-2020 Closing Notes

Market continue to post dismal performance in line with our expectations posted earlier.




WoW basis, average market cap fell by a whopping -247.69 billion PKR posting the biggest weekly loss of 2020 so far. 


Looking forward we expect the market to bottom out soon which will be an opportunity for patient investor to accumulate. Expected support falls in range of 39800 - 39500 - 38800 +/- 100 points. 

Wednesday, February 5, 2020

Week 06-2020 Mid Week Update

Index remained lack luster, breaking its last band of support at 40900 +/- 100 as mentioned in previous update ( link here )

Although marginal gains were expected on last trading day of Feb 04, it can be attributed to futures settlement of January and perhaps some short covering. 



Market capitalization has continued to shrink, and week  six opened with a significantly lower value. 


Looking forward, we expect the correction trend to continue with index bottom falling in the range of 39800 - 39500 +/- 100 point.