Long term market momentum still constructive

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Booking profits on pull backs likely course of future action

 

This move, technically known as the high wave length trend, has opened up the market to witness highly volatile moves on a weekly basis. The short term outlook has become weak and the index is likely to test the 36,300 mark, breaching which might see a fall towards the 35,900 mark

 

 

The United Kingdom’s exit from the European Union marked the fourth negative closing of the week in the Pakistani bourse, losing 848 index points (2.22pc) on Friday, to take the tally to 1,387 negative points during the week. The PSX had celebrated its inclusion in the MSCI Emerging Markets index in the week before, rallying 1,836 points to register historical highs.

This move, technically known as the high wave length trend, has opened up the market to witness highly volatile moves on a weekly basis. The short term outlook has become weak and the index is likely to test the 36,300 mark, breaching which might see a fall towards the 35,900 mark. However, a counter positive move in the next week, after a major single day fall, should not come as a surprise, but should only be considered a technical positive correction and an opportunity to book positions. Today’s closing has hinted at a shift in trend with bears likely to be in the driving seat until the index closes above 39,100 points, which can also be used as a stop loss by investors who are short.

On a longer term perspective, the momentum is still constructive, especially if the index is successful in holding its level above the 34,000 mark. The primary reason is that PSX continues to trade above its medium term and long term moving averages.The major support area is between 34,400 and 33,700 index points with an initial upside target of 41,500 points and the move may carry on till 42,500 points.

When the PSX opens Monday, the Holy Month of Ramazan would have entered its last Ashrah and hence it is likely that volumes shrink further. Week on week, they slipped 24pc this week with majority of the local investors remaining on the sidelines. The foreign investors reverted to selling this week, registering a net sale of approximately USD21 million. Mutual funds emerged as major sellers among the local players during the week, registering a net sale of approximately USD43 million. With the Eid festival approaching, it is likely that lackluster activity remains the winner and profit taking amid low volumes the likely trend over the next week.

Having said that, anxietyis likely to prevail in stocks that are sensitive to commodity markets. OGDC, PPL, POL and MARI are likely to be in the limelight with oil losing almost 6pc value on its closing. The Yen, on the other hand, is appreciating in value with respect to PKR and the automobile sector might face the burnt on this basis.

Range bound activity with low volumes seems to be the dress code over the next week and booking profits on pull backs should be the likely course of action.

 

 

When the PSX opens Monday, the Holy Month of Ramazan would have entered its last Ashrah and hence it is likely that volumes shrink further. Week on week, they slipped 24pc this week with majority of the local investors remaining on the sidelines