Weekly Summary: NEPSE Came out of the Week Stronger, How Will the next Move Look Like?

Part 1: Rundown and Technical Analysis

The NEPSE index gained for four days and lost for a day in the five trading days this week. The market is closed on Fridays and Saturdays every week. The NEPSE index closed at 2,857.75 this week after a gain of 165.28 points (6.14%). The index had closed at 2,692.47 last week with a gain of 6.65% from the week before that.

This week, the index went as high as 2,874.80 and as low as 2,699.87, hence witnessing volatility of 174.93 points. In the previous week, the index had seen the volatility of 170.06 points.

Analysis of Trend

The NEPSE index is up more than 25% compared to the same date last year. However, it is down more than 10% from the all-time high of 3,198.60 created around four months ago. Nonetheless, the index has bounced back around 26% after reaching the nearest intraday low of 2,259.63 on December 13 (most recent pivot low).

Candlestick Charting

On the weekly candlestick chart, this week's market movement has formed an extended green candle with no lower wick. Last week too, the weekly chart had formed an extended green candle.

The first trading day (Sunday) this week formed a promising green candle, a gain of 2.71% on the index. The index kept gaining in the next two trading days. The bullish sentiment then seemed to have fizzled out, as the index lost 30.51 points on Wednesday. However, the bulls dominated the trading session on Thursday, and the index gained 54.13 points.

Thus, the daily market movement closely resembled the action seen last week but with even higher market participation. 

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 68.94. It should be noted that the index crossing over 70 does not immediately indicate the possibility of a downtrend, although it denotes overbought conditions. Stocks and indices frequently venture in and out of the 70-100 zone during an uptrend. Meanwhile, the RSI reading on the weekly chart is 56.70.

On the other side of things, the MACD line is positive, i.e. above zero in the daily timeframe, with the MACD reading at 69.79. Both the MACD line and the signal line are positive, and the MACD line is above the signal line.

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. In this week, there was a significant rise in the daily turnover. The volume on Wednesday was the highest since September 20 last year.

Support and Resistance

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.

After the index broke out from the supposed resistance at 2,800 this week, it had retested the level the next day with a loss. However, the index eventually rose in subsequent sessions.

Nonetheless, it can be ascertained that the index is still inside the stronger resistance zone starting from 2,800 to 2,880. If it eventually breaks above this zone, the index may need stronger market participation to rise any further. This is because as the index rises, it approaches the all-time high. All-time highs are difficult to break until the move is supported by significant volume.

Meanwhile, if the index shows signs of bouncing below the resistance zone of (2,800-2,880), it may find the nearest support in the (2,670-2,680) level. The next zone of demand may then be found at around the 2,500-index level.

Part 2: Insight Into Important Data

More than 6.92 crore unit shares worth Rs 35.65 Arba have been traded through 4.04 lakh transactions this week. The current market capitalization of NEPSE stands at Rs. 4,037,127.22 million.

NEPSE index and Sub-indices performance: (Increment is based on the previous week closed value)

The NEPSE index increased by 6.14% this week. The Development Bank sector gained the most this week with an increment of 16.94%.

Stock with the highest monthly Beta value from the Microfinance and Non-life insurance and Hydropower.

Central Finance Limited (CFCL) has the highest monthly Beta value of 1.88 followed by
Karnali Development Bank Limited (KRBL) and Shine Resunga Development Bank Limited (SHINE) with 1.85 and 1.82 beta values respectively.

Top Ten Gainers of the week:  

Madhya Bhotekoshi Jalavidyut Company Limited (MBJC) is the top gainer of this week. MBJC closed at Rs. 379.2 with Rs. 143.6 (60.95%) 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:
Corporate Development Bank Limited (CORBL) price has decreased by 29.87% and its LTP stands at Rs. 270.

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

Api Power Company Limited (API) is the top traded company of the week. A total of Rs. 1.13 Arba worth of API shares were traded this week.

Top Buyers Brokers of the Week:

Naasa Securities Co.Ltd (Broker No- 58) was the top buyer broker of this week and it has bought stocks worth Rs 2.03 Arba.

Top Buyer Brokers Top 10 Bought Companies:

Top Seller Broker of the Week:

Naasa Securities Co.Ltd (Broker No- 58) was the top seller broker for this week. The brokerage firm has sold stocks worth Rs 2.22 Arba.

Top Seller Brokers Top 10 Sold Companies:

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

SSpro