The KSE — Overview: Technically, its just a correction

In our previous weekly market update, we tried to explain fundamental reasons behind the bullish trend of KSE-100 Index. Here, we are going to discuss technical reasons for the choppy behavior of the Index, during the week along with the expectations in the near future.

With volatile movements in the range of 1370-1447, the KSE-100 Index closed 2 points down at 1399 level. The ADV declined by almost 27% from 259.98mn last week to 190.9mn shares this week. Scrips under the spotlight were PTCL, Hubco, ICI, SNGPL, and PSO.

After testing a low of 1075 on October 2nd, the Index started picking up and gained 350 points until October 29th where it closed at 1425. The correction, in our opinion, was imminent. With a choppy price behavior, the KSE-100 dipped almost 3% by Thursday and gained back 22 points on Friday to close at 1399.

The KSE-100 Index has clearly breached its 40 Weeks Moving Average (40WMA) last week, confirming an intermediate — long-term positive trend. This may lead the Index to test 1500-1550 levels, which if breached would result in next hurdle coming at 1575-1600. If the Index succeeds in crossing these hurdles with strength, then we may confirm a rally towards 1800 to 2000 — which at the moment is premature to examine.

Now, coming back to earth, we believe that a correction is inevitable before a shorter-term rally towards 1500-1550. Currently, the Index is near its overbought zone with RSI near 70. With upcoming announcements regarding Hubco and PTCL dividend, further correction can be, however, delayed. During the week market may gain 20-30 points in the anticipation of the expected dividends, leading the Index to test resistance at 1425-1450 once again, which we believe is a strong resistance level. This may provide investors an opportunity to take profits.

Hubco

Technically, Hubco is already trading in its overbought zone, where its RSI is near 79 at current price level.

With the anticipation of a high dividend yield the scrip may test 24.60 — 25.20 levels, which are attractive for profit taking. However, on the other hand, support at 22.50 is very strong, if breached downwards, Hubco may test 20.60 level.

PTCL

PTCL is trading in its long-term positive trend. A choppy price behavior has been witnessed during the week in the band of 19.25-17.45 — it closed at 18.15 for the week. The scrip is now in its neutral trading zone with RSI nearing 62. Keeping in mind upcoming PTCL's meeting, we expect it to test 19.25 where 18.70 is the main hurdle.

PSO

PSO is a risky stock at the moment, as it already has breached its 40DMA at 110 level last week. In our opinion it has confirmed its long-term negative trend and is likely to continue downward. However, if the scrip succeeds in breaching, resistance at 110 with strength to sustain in coming week then picture can be reversed. We recommend investors to stay on sidelines.