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Saturday, February 27, 2021

KSE100 - Week 08-2021: Blood on the Trade Floor!

KSE100 continued to bleed, losing -362 points or -0.8% on a weekly closing basis. The critical pivot level of 46100 +/- 100 has been breached. While a retracement was observed at the support of 45500 +/- 300, it proved to be a dead cat bounce and the leading rejection from pivotal resistance affirms bears in control. As a result, we reiterate our stance as mentioned in so many previous posts that KSE100 is expected to stay in the corrective phase for the first half of Mar-2021 and bear hunters will take the trophy home. 45500 - 44700 +/- 300 remain the two important support levels and in event of a meltdown, we may see a free fall towards 43800 +/- 300. But we assign little probability to a breakdown further below. Also, the strength of the market has been demonstrated by a slow regression and sector-wise exchange of hands rather than a swift meltdown as it used to occur in past. For a better understanding, please read previous updates from the last three weeks. 

Once again, weekly average capitalization dunked by -106.43 billion/PKR - significantly higher than the previous week but still a triple-digit figure on the lower side. This signifies investor confidence in buying the dip. Overall, the bourse is expected to stay in high liquidity owning to numerous reforms for attracting funds into the equity markets. 

Events that may impact the equity markets are PIB auction on 3-Mar & 31-Mar. MTB auction on 10-Mar & 24-Mar and Ijara Sukuk auction on 11-Mar of the CY2021. 

Happy trading and if you enjoyed reading this update, please let us know in the comments section below. 
[Edit 1-Mar: inaccurate capitalization data is corrected and the chart is updated to reflect the correction.]

Sunday, February 21, 2021

KSE100 Week 07-2021 Closing Notes

KSE100 observed a range-bound session across the week, moving between its resistance of 46800 +/- 300 and pivot at 46100 +/- 100. The continues to show a weakening trend. Support and resistance as iterated before remains valid and also marked on the chart below. Looking forward, we expect the index to open green during the week ahead then carry its course of correction as usual. Weekly closing was observed with a net gain of +419 points or +0.92%.

Weekly closing saw a net loss of -13.85 billion/PKR - a negligible figure but affirms the view towards the ongoing correction cycle. The reporting format of the chart has been updated to reflect 60 weeks of trailing capitalization. The linear trend line has started to slope upwards and we expect a strong bullish rally due, once it crosses the vertical resistance line. (Color of the linear trend line has been changed for better visibility.)

Happy trading and if you enjoyed reading this update do let us know in the comments section below.

[Edit 1-Mar: inaccurate capitalization data is corrected and the chart is updated to reflect the correction.]

Saturday, February 13, 2021

KSE100 Week 06-2021: Who let the bears out??

Index nosedived by -1097 point or -2.34% on a weekly closing basis, honoring the divergence which has been evident on the charts for last few weeks. Closing was observed below the pivot of 46100 +/- 100 signaling further downside. Support, as indicated earlier, remains intact at 45500 - 44700 +/- 300 and the floor is at 43800 +/- 100 - a previous major pivot zone. While the index has gone through two correction cycles earlier, its momentum remained intact and the key differentiating factor of the current correction wave is rapidly weakening momentum. This may cause the market to move range-bound in the short term which will be frustrating for day traders but an opportunity for bear hunters. So oil those guns and get ready for the hunt as bears come out of their winter hibernation, we shoot'em down one by one! 

In an alternative universe, a breakdown below the major pivot zone would be doomsday; but we assign very little probability to that. Bears simply do not have enough firepower to break that line of last defense!  

Index weekly average capitalization fell by -87.12 billion/PKR. It has been showing signs of exhaustion for the last two weeks and met expectations. It may honor its previous horizontal resistance as support which means we do not expect a meltdown far below the 8000 billion/PKR. It is just an expectation, may or may not be honored.

Happy trading and if you enjoyed reading this update, do let us know in the comments below!  

Sunday, February 7, 2021

KSE100 Week 05-2021 Closing Notes: Not Much to Say!

KSE100 made its weekly closing in with a gain of +520 points or +1.12%. The last trading day of the week saw the index made an intraday breach 46800 +/- 300 critical resistance area and saw a quick dive downwards. The overall intraday closing was down by -27.84 (-0.06%). Momentum has started to show weakness which affirms our stance of profit-taking. Not a firm believer of candlestick patterns but the last trading day did close with the gravestone Doji candle pattern. which suggests that an initial spike may be observed before dipping down for a lower-low once again. The week ahead will be the decision-maker! The current expectation is sideways. 

On the downside, we carry forward the stance from the previous week indicating 46100 +/- 100 as pivotal support and 44500 - 44700 +/- 300 is a strong support level(s). Momentum has started to weaken and looking forward, it's time to change hands with profit booking in the saturated stocks and fresh entries advised in those available at attractive valuations. Some short-term potential remains in the market - like squeezing the last drop from a lemon while investors will be happier to hunt bears during the major correction cycle. We have predicted late-Feb to mid-March for this frenzy! 

On the commodities front, oil has made a historical rally with Brent crude hitting $60 briefly for the first time since the COVID19 depression. This could potentially act as a positive trigger for the OEP sector. 

Average weekly market capitalization gained another +70.77 billion/PKR over the previous week but the average has been in the double-digit limit for two consecutive weeks. The shrinking gains may be the signal of exhaustion. Overall, our outlook is to stay cautious and preserve your profits. 

Happy trading and if you enjoyed reading this update, let us know in the comments below.