Day: October 12, 2011

Karachi: KSE‐100: Formation an adjustment post breakout
• The index’s formation suggests that it witnessed a consolidation post breakout. The trend remains bullish for now, however volatility is likely to remain high.
• The Stochastic Oscillator has now generated a buy signal, which makes its formation a bullish divergence while the RSI maintains its general uptrend.
• KASB Securities maintains a cautious buy for short term trading purposes.

Analysis and Overview:

According to KASB Securities , the index opened marginally positive and after touching its day’s high remained under pressure throughout the session to close in the red. Volumes declined by 22.60% and stood at 141.71 mln. The index remained relatively muted compared to the previous candlestick. The resultant formation suggests that it witnessed a consolidation post breakout. The trend remains bullish for now, however volatility is likely to remain high.

The Stochastic Oscillator has now generated a buy signal, which makes its formation a bullish divergence, while the RSI maintains its general uptrend. Moreover the MACD maintains its uptrend as well as buy signal.

KASB Securities maintains a cautious buy for short term trading purposes.

The first support is at 11,985 points and the second support is at 11,914 points. The first resistance is at 12,118 points and the second resistance is at 12,186 points.

Karachi: Gold Spot

• Gold’s safe‐haven appeal was absent, as the metal slipped with equities ahead of a key Slovak vote to consider raising the size of the EU rescue fund.
• From a technical perspective, gold’s Stochastic Oscillator maintains its buy signal while the RSI maintains a steady uptrend.
• The first support is at $1,649.76 and second support is at $1,628.21. The first resistance is at $1,673.00 and the second resistance is at $1,684.63.

Gold slips ahead of Slovak vote

According to KASB Securities , a key vote scheduled to be held in Slovakia on expanding the size of the EU rescue fund kept financial markets on edge. Gold moved lower, in sync with riskier assets, with its safe‐haven appeal largely absent as investors awaited the outcome of the vote. Slovakia is the only country from the 17‐nation Euro bloc that has yet to approve an increase in the size of the European Financial Stability Fund (EFSF).

Technical Strategy: Buy

Although gold closed in the red, it registered a higher high and a higher low. Moreover its low coincided with the 100‐DMA, above which it gave a breakout on Monday. Its formation is a “Bullish Divergence” as despite its negative closing the Stochastic Oscillator maintains its buy signal while the RSI maintains a steady uptrend. Additionally the MACD has now generated a buy signal. The first support is at $1,649.76 and second support is at $1,628.21. The first resistance is at $1,673.00 and the second resistance is at $1,684.63.

WTI Spot (Crude Oil)

• Oil added further gains bringing a fruitful run to five days despite a reduction in oil demand forecast by OPEC.
• From a technical perspective, WTI’s Stochastic Oscillator, though overbought, maintains its uptrend as well as buy signal.
• The first support is at $84.98 and second support is at $84.12. The first resistance is at $86.65 and the second resistance is at $87.51.

Oil continues its ascendancy

WTI crude extended its winning streak to five sessions paying little heed to oil producing cartel OPEC’s reduction in its global oil demand forecast. OPEC’s revised estimates now call for demand to grow by 0.88mn bpd to 87.81mn bpd in 2011. For 2012, the organization anticipates a modest 1.2mn bpd growth in oil demand. Underlying reasons behind the forecast cut were reduced growth prospects in developed nations, the possibility of a Greek default, and less robust demand in China.

Technical Strategy: Buy on Weakness

WTI opened in the red however recovered to close in the green and marginally above its channel resistance trend-line. Moreover it closed above the 30‐DMA and 50‐DMA. The Stochastic Oscillator, though overbought, maintains its uptrend as well as buy signal while the RSI maintains its general uptrend as well as buy signal. Additionally the MACD maintains its buy signal. The first support is at $84.98 and second support is at $84.12. The first resistance is at $86.65 and the second resistance is at $87.51.

Silver Spot
• Silver traded in a range of US$1.18 but closed the session nominally in the red.
• From a technical perspective, silver’s Stochastic Oscillator maintains a steady uptrend as well as buy signal while the RSI continues to rise as well.
• The first support is at $31.56 and second support at $30.80. The first resistance is at $32.74 and the second resistance is at $33.46.

Silver inches lower

Silver traded in a range of US$1.18 but closed the session nominally in the red. Two FOMC members are due to address seminars today, followed by the release of the much awaited FOMC Meeting Minutes.

Technical Strategy: Buy

Silver remained relatively muted to close flat. Its formation, however, suggests that it is consolidating below its critical resistance of $32.69. The Stochastic Oscillator maintains a steady uptrend as well as buy signal while the RSI continues to rise as well. Moreover the MACD has now generated a buy signal. The first support is at $31.56 and second support at $30.80. The first resistance is at $32.74 and the second resistance is at $33.46.

Karachi: The Securities and Exchange Commission of Pakistan (SECP) is planning to increase the minimum capital requirements for Brokers in order to improve the standard of financial markets in the country and also to promote small brokers for mergers and acquisition to turn into financially strong brokerage houses and participate in the stock exchange.

According to Alfalah Securities, SECP Chairman Mr. Muhammad Ali has shown interest in transforming brokerage houses larger and stronger and to encourage them in extensive marketing and research for investor’s awareness.

At present, the minimum capital requirement for brokers is fixed at PkR 2.5 mn as per the law created in 1970 which is negligible and could be revised by the SECP. The enhancement of minimum capital requirements if implemented may decrease the number of brokers and would force many small brokers either to closure of operations or to merge/get acquired with other brokers.

Market Outlook:

Buy on dips.

Karachi: The government is expected to raise power tariff by 12% for FY12 with approval of the cabinet in order to recover line losses and non-collected electricity bills.

According to Alfalah Securities, the government has figured an amount of PkR 117 bn occurring from line losses and non-collected bills and a hike in power tariff is expected to recover PkR 67 bn while the remaining PkR 50 bn would be compensated as a subsidy by the government. It is also being expected by the committee formed by the government that NEPRA should permit actual losses and 100% fuel adjustment charges in the tariff along with a revision of method by NEPRA used for calculating line losses. The committee is also expected to propose that the tariff adjustment method should be implemented on immediate basis while, connections should be disconnected if bills have not been paid for more than 45 days.