KSE100: Week 26-2020 Closing Notes

KSE-100 re-tested the lower band of its support of 33800 +/- 100 followed by a bounce. Now closing above the pivot of 34200 +/- 100 shall decide for further upwards break.

We would like to reiterate once again that the market is trading in a minor trend and a sustained break above 33600 +/- 300 would set it into a major bullish momentum. Volatility is expected to remain high as long as market trades below this level. 

On the global commodities front, oil has remained under pressure due to prospects of weak demand recovery and fears of second pandemic wave triggering a fresh lockdown. Heavy weightage of OEP in KSE100 could cause downwards drag on the index. On the positive front, further reduction in interest rate  (Monetary policy: SBP slashes interest rate by 100bps to 7%) can improve money flow into equities market as cash-based saving schemes become less attractive. 

The major money market event this week is a T-bill auction on 30th June for a target of 150 billion/PKR. A full calendar of auctions can be found here.

DoD Capitalization hints towards profit taking with recovery seen on the last day of trading. The weekly average closed with gains of +14.28 billion/PKR. From a wider perspective, the performance over the week has remained neutral in terms of capital flows. This affirms our view from previous updates that KSE-100 is undergoing consolidation with the exchange of hands between sectors. 

KSE100: 26-2020 Mid Week - The Imperfect Play

KSE-100 narrowly escaped the lower boundary of 33600 +/- 100 on 19th June, Friday followed by an intraday dip during the next trading session on 22nd June, Monday which led to a sharp recovery of few hundred points. Thereby, demonstrating 33600 +/- 100 being honoured on a closing basis - though with some imperfections.  This was caused due to increased volatility and as mentioned in the previous update, will lead to a discovery of new support and resistance zones. 

Looking forward, KSE-100 is trading below its pivot with any potential for correction taking it towards intermediate support of 33800 +/- 100. A break above the pivot will find intermediate resistance at 34600-34800. Meanwhile, the channel top has dropped slightly downwards to 35100 +/- 100. Previous resistance becomes support during downtrend or vice versa.

DoD basis, index capitalization has sustained above the outgoing weekly average, which means investor interest has remained firm so far. Further, the week closing on Friday shall disclose the full view. 

KSE-100 Week 25-2020 Closing Notes

Political uncertainties and fear of the second pandemic wave kept a negative mood prevalent at the bourse. While the index did try to put a show of support at 33800 -/+ 100 as mentioned in our previous update, it did not resolve into any visible action and hence dismissed. Weekly closing of KSE100 clung narrowly to the lower band of 33600 +/- 100 support range - and it raises a lot of concern. On a positive note, oil and banking index have closed on a rebound which demonstrates the exchange of hands between sectors. 

Looking forward, we expect the bourse to perform selectively in certain sectors with increasing volatility and will lead to the discovery of new support and resistance zones. This makes the week 26 ahead, all too important. Risky positions shall be maintained with SL. 

KSE-100 weekly capitalization stands at a loss of -180.25 billion/PKR, which is significantly higher than the weekly average gains of two previous periods. We may attribute this to profit-taking but a further loss of capitalization in the week ahead would initiate a reversal into bearish territory. 

Banking Index PSX

Oil & Gas Index PSX

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There are other software's out there which do similar functions and it is even possible to use host files which can invalidate DNS resolution for advertisement server. But what I found useful about AdGuard browser extensions is their stealthy capability, which does not hinder functionality or interferes with an online experience.

I tried the desktop version of AdGuard and it came up with the same issue of impacting functionality for websites that detect advertisement blockers. So, in a nutshell, browser extension does a fine and plenty of a job.

AdGuard is also available for Andriod mobile devices and while I have not tried it out in-depth, it seems to be doing a fine job. I will make a follow-up post later on the mobile experience. 

Calendar Tracking for Sukuk Ijara Auctions

We are now tracking SBP Sukuk Ijara auctions through our dedicated auctions calendar page here. These auctions are participated by Sharia-compliant hybrid funds therefore, they are an important variable to track. 

KSE-100 Week 25-2020 Mid Update

KSE-100 dipped inline with our expectation but appears to be discovering a new intraday support zone at 33800 +/- 100 vs our prediction of 33600 +/- 100. A rising support zone is a positive sign and demonstrates bullish momentum gaining strength however, it does not mean that major support has become invalidated unless proven by behavioral evidence. 

The index is also undergoing consolidation due to profit-taking and exchange of hands between sectors. This shall be evident in the day ahead when some sectors begin to lose value while others begin to gain it. 

DOD capitalization was observed to be lower than the outgoing weekly average with first trading day of the week showing massive dip followed by progressive recovery.

Today's T-bill and PIB auction had a lower than expected toll - probably due to rejected bids amid falling yield rates. This indicates that the capital shall soon return to the equities market. 

Source:

1. Auction Result: SBP Sells T-Bills worth Rs.78.90 Billion
2. MTB Auction: Bid Pattern
3. PIB Auction: SBP sells floating rate PIBs worth Rs.124.55 billion
4. PIB Auction: Bid Pattern

Our Take on Crude Oil (Platts Dubai AUG-2020)

Plenty of upside space with supporting technical indicators and a similar forecast also made by BP. The overall momentum is an uptrend and technical indicators demonstrate $40 (EMA21W) as interim resistance. A break sustained above this level may trigger a bullish momentum. 

It now expects international benchmark Brent crude futures to average around $55 a barrel from 2021 through to 2050, with Henry Hub gas prices forecast to average $2.90 over the same period. 

https://www.cnbc.com/2020/06/15/oil-bp-announces-write-downs-lowers-brent-price-expectations-to-2050.html

KSE-100 Week 24-2020 Closing Notes: Correction as Predicted

KSE-100 took a corrective dip slightly earlier than our predicted resistance of 35500 +/-100 (vs 35253 actual high). The deviation was influenced by global equities sell-off and fall of -10% in oil prices.  On the lower side, day closing breached the first support of 34800 +/- 100 which could play out two possible scenarios. An intraday correction taking support from 34100 +/- 100 and posting recovery during the second half or a harder correction taking support at 33600 +/- 100 on a closing basis. 

The last trading day of the week saw a drop of -86.60 billion/PKR in intraday capitalization possibly due to profit-booking,  but overall weekly average gained +75.32 billion/PKR - a positive sign. 

Looking forward, we expect the market to keep trending strongly with the usual course of correction taking place where due. But caution must be exercised as ambitious T-bill and PIB auctions will expose it to the risk of a capital drain. Preserve your profits with a sensible exit strategy or stop loss.  T-Bill and PIB auction calendar is found here. 

KSE-100: Week 24-2020 Mid Update

KSE-100 successfully break through our first benchmark of 34800 +/- 100. Now it must sustain above this to take out next upside resistance of 35500 +/- 100. Any potential dip for correction will find support at 34800 +/- 100 (previous resistance acting as support). While upside target remains intact at 35500 +/-100 and 36300 +/- 300 is retained at channel top indicated several weeks ago. A break and sustain above the channel top will unleash the major bull momentum. But we are not too optimistic and expect one major corrective move before any breakthrough can be expected. 

Initial analysis (link-1) indicating 36300 +/- 300 as a return of major bullish momentum first appeared in week 12-2020 publication. We have not backed down from our stance since then. 

Intraday KSE-100 capitalization has sustained above its previous week average which signifies strong bullish momentum. 

Major events to have an impact on the bullish rally are MTB and PIB auctions as covered here: MTB & PIB Auction Calendar (2020). A dedicated page has been set up for the auction calendar to better keep track of. 

KSE-100 Week 23-2020 Closing Note

Inline with our expectation posted in the mid-week update ( link-1 ), index tested its support at 34100 +/- 100 and bounced but volume and capitalization remains weak. This could change in the week ahead as investment confidence gets a boost post-lock down. Our upside expectations of 34800-35500 +/- 100 remains intact. 

After a dull holiday week, capitalization improved and weekly average as closed +54.80 billion PKR. Over all a dull picture still, but improvements are expected ahead. 

KSE-100 Week 23-2020 Mid Update

Week 23 started on a dull note with range-bound activity persistent so far. The index has managed to break away from its weak resistance of 34100 +/- 100 but did not form a rally yet. The upside potential of 34800 - 35500 +/- 100 remain intact while a probability of moderate correction cannot be ruled out. Any corrective move is likely to re-test 34100 +/- 100 as support which was earlier acting as resistance. 

Another adversely affecting event today was T-Bill auction by SBP. ( Auction Result: SBP Sells T-Bills worth Rs.172.53 Billion )

Market capitalization has fluctuated in a narrow range throughout the current week, with intraday closing values standing higher than  outgoing week average. This demonstrates an ongoing process of consolidation and exchange of hands between sectors.