Weekly Summary: NEPSE Loses 69.05 Points Amidst Political Turmoil and Speculation, These Are the Major Highlights

Fri, Feb 18, 2022 11:36 AM on Weekly Analysis,

-ShareSansar

Part 1: Rundown and Technical Analysis

The NEPSE index gained for three days and lost for two days in the five trading days this week. The market is closed on Fridays and Saturdays every week.

The NEPSE index closed at 2,732.51 this week after a loss of 69.05 points (-2.46%). The index had closed at 2,801.56 last week with a loss of 2.61% from the week before that.

This week, the index went as high as 2,783.89 and as low as 2,695.12, hence witnessing volatility of 88.77 points. In the previous week, the index had seen volatility of 130.08 points.

Analysis of Trend

The NEPSE index is up around 5% compared to the same date last year. However, it is down around 15% from the all-time high of 3,198.60 created around five months ago and down around 8% from the most-recent pivot high.

Candlestick Charting

On the weekly candlestick chart, this week's market movement has formed a small red candle with a lower wick. Last week's candle was a small red candle with a long upper wick.

The first trading day (Sunday) this week saw strong bearish momentum, and the daily candlestick was long, red which opened at the intraday high and closed 100.67 points lower from last Thursday's closing. Although the bulls tried to fight back with a minimal gain of 0.09 points the next day, and 53.31 points the day after, a bearish mood eventually ensued, and the index closed red for the last two trading days this week.

Momentum Indicators

The relative strength index (RSI) is a momentum indicator used in technical analysis that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or index. Traditional interpretation and usage of the RSI are that values of 70 or above indicate that a security is becoming overbought or overvalued and may be primed for a trend reversal or corrective pullback in price. An RSI reading of 30 or below indicates an oversold or undervalued condition.

The RSI reading on the daily timeframe is 44.55. The daily RSI chart has been downwards sloping this week, indicating a gradual decline in optimism. The daily RSI reading crossing over the 50 mark would indicate the likeliness of bullish momentum for the short term.

Meanwhile, the RSI reading on the weekly chart is 50.10, which has also been downwards sloping for the last five weeks. However, it should be noted that indicators have a lagging nature, and a single indicator can't be used to gauge market sentiment.

On the other side of things, the MACD line is negative, i.e. below zero in the daily timeframe, with the MACD reading at -4.61. It had started sloping downwards from last week. The MACD line is also below the signal line, indicating a bearish sentiment.

Volume

A chart reader can deduce investor sentiment with volume. Essentially, trading volume can legitimize a security's price action, which can then aid an investor in their decision to either buy or sell that security.

During market falls, the volume is dry and during bullish days, there is a general increase in volume.

This week, the volume declined as the week progressed. It was the lowest on Thursday, the last trading day.

Support/ Resistance and Price Action

First and foremost, there is no rigid rule to deduce support and resistance levels from a stock/ index chart. Technical analysis is more an art rather than hard science since it is an attempt to deduce market psychology after all. As is the case with human behavior, markets are largely unpredictable, subject to whims and instance changes in sentiment. The best a chart reader can do is deduce investing strategies using what has worked historically, and what gives a competitive edge even in securities other than those present in the sample data.

The resistance level is simply the price above which the index has had trouble moving up. Thus, the previous high (or a series of highs if they are on the same level) can be used as resistance. Meanwhile, if the stock or index chart has gone below the previous low, it can also be inferred as a resistance level, since the previous support level acts as resistance if the price/ index has broken below it.

On the other hand, the support level is simply the price below which the index has had trouble moving down. Thus, the previous low (or a series of low if they are on the same level) can be used as support. Meanwhile, if the stock or index chart has gone up the previous high, it can also be inferred as a support level, since the previous resistance level acts as support if the price/ index has broken above it.

For the week, the index had found support at the 2,700 level. The index showed signs of reversing upwards with a 53.31 points gain the next day. However, the other two days ended in confusion and indecisiveness, and the index could not demonstrate further incline.

If the index violates the support and keeps falling, the next area of value may be at the 2,600 level.

On the upper side, the previous pivot high at 2,925.05 and the one before it at 2,981.35, which also has historical credibility will act as the immediate resistance levels. The index will face higher resistance the higher it goes since it needs extraordinary market participation to surpass the all-time high.

"Eleven years at school, two years at college, three years at university, and all I needed to do was learn how to draw a horizontal line."
- Tom Dante.

The 50-day exponential moving average (50EMA) has historically acted as a support level for the NEPSE index. Two weeks ago, however, the index had bounced back from a premature correction and did not test this level. On the previous weekly summary, it was mentioned that the correction would have been healthier if the index had tested the level. Its effect was thus seen last week, as the index failed to sustain the rise.

Meanwhile, the NEPSE index plunged below the 50EMA this week. Nonetheless, it should be noted that the index hasn't ventured very far from the 50EMA price area, and reversals sometimes happen from the lower level of the area of value.

Part 2: Insight into Important Data

More than 4.56 crores unit shares worth Rs 18.19 Arba have been traded through 2.49 lakh transactions this week. The current market capitalization of NEPSE stands at Rs. 3,870,294.92 million.

NEPSE index and Sub-indices performance: (Increment based on previous week's close)

The NEPSE index declined by 2.46% this week. Only Others sector gained this week.

Stocks with highest monthly Beta (Microfinance, Commercial Bank, Hydropower)

Wean Nepal Laghubitta Bittiya Sanstha Limited (WNLB) has the highest monthly Beta value of 0.77 followed by Forward Microfinance Laghubitta Bittiya Sanstha Limited (FOWAD) and Chhyangdi Hydropower Company Limited (CHL) with 0.66 and 0.59 beta values respectively.

Top Ten Gainers of the week:

Jeevan Bikas Laghubitta Bittiya Sanstha Limited (JBLB) is the top gainer of this week. JBLB closed at Rs. 4960 with Rs. 335 (7.24%) increment.

All the analysis is done with the SS Pro Software. To know more about the software, click on the link below

SSpro

Top Ten Losers of the week:

Gurkhas Finance Limited's (GUFL) price has decreased by 8.08% and its LTP stands at Rs. 696.

Top Stocks by Turnover, Volume, and Number of Transaction:

National Hydro Power Company Limited (NHPC) is the top traded company of the week. A total of Rs. 1.24 Arba worth of NHPC shares were traded this week.