Turkey Stock Index Drops After Testing 200-Day Moving Average

Turkey’s benchmark stocks gauge retreated after breaking through its 200-day moving average as a key technical indicator showed the index may be “overbought.”

The ISE National 100 Index fell 1.1 percent to 57,171.34 at the close in Istanbul after breaking through its 200-day moving average of 58,361.37 earlier in the day, climbing as much as 1.1 percent. An index’s rise above its 200-day average is a signal to some traders who use technical analysis that a sustained rally is beginning.

The plunge was led by banks, with the banking index dropping 2.9 percent, snapping four days of gains.

The Turkish stock market had “the global wind in its sails” and showed signs of being overbought before the plunge, Isik Okte, strategist at Halk Invest in Istanbul, said by e-mail. “If we don’t get any immediate results on the Greek issue, then profit-taking will ensue.”

The relative strength index for the gauge was at 73. A reading above 70 indicates shares are overbought and prepped for a drop, according to technical analysts.

Greek Premier Lucas Papademos said today he would try to meet German-led demands for a bigger debt writedown by investors and deeper budget cuts as his government tries to prevent the collapse of a second rescue package from creditors.

More Liquidity

The Turkish banking index has added 3.7 percent since U.S. Federal Reserve Chairman Ben Bernanke signaled on Jan. 25 that interest rates will remain low through 2014. Turkiye Halk Bankasi AS, a state-run bank, has surged 18 percent this year. Akbank TAS, the lender part-owned by Citigroup Inc., has jumped 11 percent. The ISE National index fell 22 percent last year.

Liquidity operations like the Fed’s will be the “underlying theme of 2012” for Turkish equities, Okte said. Any retreat in the Turkish index is “a buying opportunity for me because the theme is constant - liquidity and more liquidity by central banks to come.”

“Since the market rallied after the Fed’s commitment to more liquidity, a lot of Turkish equities including Akbank and Halkbank started trading above their 200-day moving average, which is considered a long-term bullish signal,” Mahmut Dermancioglu, a trader at BGC Partners in Istanbul, said in response to e-mailed questions. “Whether it breaks through or falls back will set the tone.”

The ISE National 100 index has gained 12 percent this year.

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