Week 18-2020 : We Like to Hold Our Ground!

Note: There is no week 18-2020 mid update since the trading week was short by one day due to the labor day holiday on the 1st of May 2020. 

KSE100 made a spectacular breakout from its pivot zone, breaking the 33600 +/- 100 zones and sustaining a daily close above it. Throughout April 2020, our stance on the market has been consistent despite all the adverse news floating around. Since this is also a month closing update, we will make a recap of the previous commentary in the exact words it was posted. 

• 3/Apr: Next resistance falls in the range of 32400-33600 +/- 100 which must break and close above this range to continue the bullish trend. 

• 8/Apr: support and resistance falling in the range of 30500 - 30200 +/100 and 31800-32400 +/- 100 respectively. While upside channel top rest at 33600 +/- 100. 

• 10/Apr:  sustaining a close above 31800 +/- 100. Now 32400-33600 +/- 100 remains the next hurdle.

• 17/Apr: KSE100 has successfully breached its second benchmark resistance of 32400 +/- 100 and sustained a closed above it

• 22/Apr: Any upside will face the next resistance in the range of 34800 +/- 100 whereas, support falls in the zone of 31800-32400 +/- 100. 

• 24/Apr: However, neither of the condition has been fulfilled at week closing and therefore we carry forward our stance to next week. (market closed neutrally at pivot) 

Looking forward, we expect three possible outcomes based on technical analysis. Only the week opening may reveal the full picture. 

1. KSE100 will continue its strong rally, break the 34800 +/- 100 barriers, and hit its channel top at 35500 +/- 100. Then drop for a trend reversal. 
2. A weaker rally may be observed until the next resistance point of 34800 +/- 100, followed by a moderate drop for correction and then, another recovery up to the channel top of 35500 +/- 100. 
3. A pre-mature reversal before hitting the next major resistance of 34800 +/-100; which would be a negative sign. 

Daily market capitalization went up by a significant +152.66 PKR/Billion but weekly average capitalization shows a dismal figure of only +39.96 PKR/Billion. This could be an expression of underlying market weakness which may only be confirmed at the opening of the next trading day.

Happy trading! 

Week 17-2020 : KSE-100 Closes in a Narrow Range

Follow up on our previous midweek update (link) it was mentioned that KSE-100 shall test its intraday support at 31800 +/- 100 or resistance at 33600 +/- 100 on a closing basis to further define trend direction. However, neither of the condition has been fulfilled at week closing and therefore we carry forward our stance to next week. 

Edit 25-Apr: Chart updated with additional marking and enlargement for better visibility. 

Intraday market capitalization declined by -24.72 PKR/billion whereas, WoW average market capitalization appreciated by +181.74 PKR/billion. 

Looking forward, oil price appreciation in international markets, further possibility of rate cut as hinted by Reza Baqir (More steps can be taken on interest rate: State Bank) are positive triggers for the market. 

Happy trading!

Week 17-2020 Mid Update

Follow up from our previous update (link), the index has honored its high of 33600 +/-100 and then dipped to test its support at 31800 +/- 100 on an intraday basis. We now wait for these levels to be confirmed on a closing basis. 

Major event today was MTB auction which registered a significant drop in yields. (link-1 , link-2). 

Market capitalization started with a slight gain on the first day of the week followed by a drop the next day. Capitalization stood relatively neutral today against the expectation of a drop due to MTB auction. This perhaps demonstrates a lack of equity investor's interest due to reduced yields. 

Looking forward we expect the market to re-test its support and resistance zones on a closing basis. It is approaching near its technical saturation point which can trigger mass profit taking to change the trend downwards. Further reduction in interest rates is a positive trigger for the market. 

Any upside will face the next resistance in the range of 34800 +/- 100 whereas, support falls in the zone of 31800-32400 +/- 100. This will be the previous resistance zone now acting as support. 

Week 16-2020 Closing Notes

KSE100 has successfully breached its second benchmark resistance of 32400 +/- 100 and sustained a closed above it as mentioned in previous update (link).  33600 +/- 100 remains the last resistance level waiting to be broken. On the lower side support falls in the range of 31800-31400 +/- 100. This would be a previous resistance range now acting as support. 

Capitalization wise index has posted a high intraday gain but the weekly average remains neutral. This is a cause of concern as it hints towards possible market saturation. 

Looking forward, we expect some correction to happen in due course and advice to protect profits. All upside shall be treated cautiously since the index is still trading below its daily MA/EMA 200. Closing and trading above 36300 +/- 300 required to be considered a strong bull market. 

Happy trading! 

Week 16-2020 Mid Update

The index remained under pressure on the back of falling oil prices after OPEC+ deal failed to uplift oil markets. Oversupply glut continues to persist as both Saudi and USA report record inventory building.

Major event today was PIB auction (link) which usually causes downward pressure on equities due to capital drain. On the positive side, yield has dropped significantly which is a positive signal for equities in medium to long term.

Market capitalization registered a negligible loss and index has taken a reverse after breaking 31800 +/- 100. It is likely to revisit the range of 30900-30600 +/- 100 before taking another slingshot. Looking forward, we expect to see some sector-wise disparity and advice to be cautious about protecting profits.

Happy trading!

Week 15-2020 Closing Notes

The market has kept its positive momentum despite intraday correction and managed to break our first benchmark of sustaining a close above 31800 +/- 100. Now 32400-33600 +/- 100 remains the next hurdle. We reinstate our cautious approach to protecting profits once again while index must break and trade above 36300 +/- 300 points to enter a major bullish territory. 

Another winning close of the week with average WoW capitalization growing by PKR +260.76 billion. 

Looking forward, we expect the positive momentum to continue with some risk defined in the OEP sector which is in turn dependent on OPEC+ summit. Thursday negotiations have been marred by Mexico's walkout but since then they have returned to the table and agreed to output cuts under a deal brokered by President Trump himself ( link-1, link-2 ).

Edit 11-Apr
As per Bloomberg report, Mexico still poses stiff resistance to OPEC negotiations which have delayed the Aramco release of April OSP (link-1). Mexico's secret trick under the sleeve is its state policy to hedge oil against low prices (link-2). 

Source:  Bloomberg

Week 15-2020 Mid Update

The market has continued to exhibit some instability with support and resistance falling in the range of 30500 - 30200 +/100 and 31800-32400 +/- 100 respectively. While upside channel top rest at 33600 +/- 100. 

DoD basis, marginal loss of capitalization can be attributed to profit-taking and MTB auction (link-1, link-2) which sometimes impact equities negatively due to capital shifting. However, continued loss of capitalization is a bearish signal. Otherwise, it shall be regarded as usual consolidation which takes place before the next phase of upwards breakout. 

Happy trading! 

Week 14-2020 Closing Notes

Continuing its momentum from the previous day, the index has maintained its bullish wave and closed another day with significant gains. It is now trading in a moderately bullish territory - a pre-accumulation phase before another breakout may happen. Next resistance falls in the range of 32400-33600 +/- 100 which must break and close above this range to continue the bullish trend. Failing to meet this benchmark can lead to a trend reversal. 

WoW basis, average market capitalization posted its first positive weekly closing after several weeks of losing streak. This represents a significant return of investor confidence into the market supported by very attractive valuations. 

Looking forward, we reinstate our advice to trade cautiously due to economic uncertainty and instability caused by COVID-19 pandemic and remain vigilant for profit-taking. 

Spectacular Breakout Amid COVID-19 Skepticism

Although it's not usual for us to make an update today, unusual circumstances call for an unusual update.

KSE-100 performed a spectacular comeback breaking our benchmark of 30100 +/-100 ( link ) and sustaining a close above it by a wide margin.

Market capitalization is up by +206.47 billion PKR intraday which beats the Mar-31 record of +190.21. Highest ever gain recorded in a single week during the COVID-19 crisis. It is hard to ignore market breakouts with spectacular capitalization gains.

Another interesting pattern to note on a wider time frame is that 28600 +/-100 has emerged as an area that can defend itself. Despite our skepticism fueled by COVID-19 related negativity and worldwide market meltdown, a break down below this area did not survive for too long. Refer to the previous post made on Mar-28  ( here ) for better understanding.

Looking forward, we hold a cautious view of the market and advise prompt profit-taking. Economic situation and decision making amid the COVID-19 crisis remain vague and volatile. Dips will be an opportunity to accumulate but patience shall be exercised to get support confirmation before proceeding. 

Happy trading! 😀

Week 14-2020 Mid Update

We reiterate our views posted in previous update ( link ) with 29800-30100 +/-100 being a critical resistance to test the market during the current week. 

Capitalization wise, the market has posted a whopping increase of +190.21 billion PKR on Mar-31 which is attributed to March futures settlement in our opinion. The uptrend in capitalization has not shown a consistent pace of growth today with an increase being marginal while the market maintained a see-saw trend intraday. Together these two signals register as signs of exhaustion and we shall watch the market cautiously at its critical resistance.