A CASE STUDY: TECHNICALS & KSE100 INDEX IN CY21
Despite the economic, political distress in CY21 and volatility across diverse asset classes, Stock Market reversals in the year 2021 has been fully backed by the classical Technical Analysis applications in Pakistan Stock Exchange (PSX).
Reversal I:
In the beginning of the year we found textbook examples of double top pattern around 47.3k (04th to17th Feb, 2021) followed by sharp corrections towards 42.8k and bullish reversal on 12th march with bullish candle, oversold momentum and channel support. (Graph A- Double Top)
Reversal II:
Later on, we found another textbook example of bearish divergence in the beginning of June,21 above 48.3k levels and we’ve witnessed repeat of similar reactions after Technical Alerts, a substantial decline towards 43K levels, where just Index lost almost 11% along and majority of the stocks corrected well above 30% and some went as low as more than 50%. (Graph B- Bearish/Bullish Divergence)
Reversal III: BULLISH DIVERGENCE
Fast forward to November end 2021, we can easily comprehend similar situations in KSE100 INDEX now….a bullish divergence below 43.8k levels.
Bearish pattern that we found back in the month of June 08, 2021 and intimated to all of our group members (post Link attached) finally comes to an end now.
Yet again we’re observing exhaustion in short-term bearish patterns in KSE100 INDEX hourly trend.
· Index seems exhausted with bearish trend and momentum started diverging below 43,800 levels.
· Hourly bullish divergence charging momentum for higher moves. (possible case for Higher Highs)
· A Short-term break above the key resistance line would trigger violation/failure of H&S pattern and sharp upward move expected.
(Graph C- Bullish Divergence)
