NEPSE Bounces Back From Critical Support With Higher Volume (Weekly Summary With Technical Analysis, Sector Comparison, and Snapshot of Major Market Movers)

Part 1: Rundown and Technical Analysis

There were only four trading days this week. The exchange was closed on Tuesday on the occasion of Women's Day. The market is closed on Fridays and Saturdays every week.

The NEPSE index closed at 2,566.90 this week after a gain of 19.86 points (0.78%). The index had closed at 2,547.04 last week with a loss of 2.43% from the week before that.

This week, the index went as high as 2,568.11 and as low as 2,499.03, hence witnessing volatility of 69.08 points. In the previous week, the index had seen volatility of 69.74 points.

Analysis of Trend

The NEPSE index is up only around 4% compared to the same date last year. It is down around 20% from the all-time high of 3,198.60 created around seven months ago and down around 13% from the most-recent pivot high.

Candlestick Charting and Volume

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

The first two trading days were insignificant this week, and the index made indecisive small-body candles on the candlestick chart. NEPSE then lost 30.36 points on the third day, apparently continuing the downwards dash.

However, the index gained 52.32 points on the last trading day, and this has resulted in the formation of a bullish engulfing pattern on the candlestick chart. The extended green candlestick formed on the last day has engulfed the bodies of the previous three candlesticks.

Given that the extended green candle was formed with the highest intraday volume of the week, the potential of bullish reversal seems probable.

Support/ Resistance, 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.

The low of the candle formed on Thursday, i.e. the 2,499.03 level will act as immediate support.

Meanwhile, the 2,670 and the 2,760 levels are resistance levels determined by price action. Although it is rational to take the line joining the highs as the trend determinant during a downtrend, the line joining the recent lows also reveals that the index may find resistance immediately at the 2,580 zone.

Fibonacci Retracement

The bullish engulfing pattern has formed at the 0.618 Fibonacci zone, which is considered a critical support zone. Overall, a promising candlestick movement with promising market activity at a significant support zone is a hopeful signal for the upcoming trend.

Nonetheless, further confirmation is helpful to conclude a reversal. This is why the upcoming week is a critical one.

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 36.20. The index has penetrated above the 30 RSI level. This may be an indication of a potential change in sentiment, although indicators have a lagging nature and can't be relied upon for a forecast.

Meanwhile, the RSI reading on the weekly chart is 44.18.

On the other side of things, the MACD line is still negative, i.e. below zero in the daily timeframe, with the MACD reading at -19.41. It had started sloping downwards from the last four weeks. The MACD line is also below the signal line, indicating a bearish sentiment.

Part 2: Insight into Important Data

More than 2.10 crores unit shares worth Rs 10.23 Arba have been traded through 1.69 lakh transactions this week. The current market capitalization of NEPSE stands at Rs. 3,637,539.97 million.

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

The NEPSE index increased by 0.78% this week. Development bank increased the most this week with a 3.11% increment.

Stocks with highest monthly Beta (Hydropower)

Nyadi Hydropower Limited (NYADI) has the highest monthly Beta value of 2.57 followed by United Idi-Mardi and R.B. Hydropower Limited (UMRH) and  United Modi Hydropower Limited (UMHL) with 2.55 and 2.26 beta values respectively.

Top Ten Gainers of the week:  

Mailung Khola Jal Vidhyut Company Limited (MKJC) is the top gainer of this week. MKJC closed at Rs. 685 with Rs. 70 (11.38%) 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:

ICFC Finance Limited Promoter Share (ICFCPO) price has decreased by 24.85% and its LTP stands at Rs. 280.3.

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

Shivam Cements Limited (SHIVM) is the top traded company of the week. A total of Rs. 54.17 crores worth of SHIVM 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 92.66 crores.

Top 10 Bought Companies:

Top Seller Brokers 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 77.35 crores.

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