Weekly Summary: NEPSE Index Back to Where It Was Exactly A Year Ago, National and Int'l Events Raise Concerns

Fri, Feb 25, 2022 3:37 PM on Stock Market, Weekly Analysis,

-ShareSansar

Part 1: Rundown and Technical Analysis

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

The NEPSE index closed at 2,661.44 this week after a loss of 71.07 points (-2.6%). The index had closed at 2,732.51 last week with a loss of 2.46% from the week before that.

This week, the index went as high as 2,750.09 and as low as 2,654.98, hence witnessing volatility of 95.11 points. In the previous week, the index had seen volatility of 88.77 points.

Analysis of Trend

The NEPSE index is up only around 2% compared to the same date last year. It is down around 16% from the all-time high of 3,198.60 created around five months ago and down around 11% 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 longer upper wick and a short lower wick. Last week's candle was a small red candle with a lower wick.

The first trading day (Sunday) this week saw bearish momentum, and the daily candlestick was short, red which opened near the intraday high and made a long lower wick. Although the bulls tried to fight back with double-digit gains for the next two days, a bearish mood eventually ensued, and the index lost heavily on Thursday.

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 38.72. The daily RSI chart has sloped downwards 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 47.36, which has also been downwards sloping for the last six 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 -21.10. It had started sloping downwards from the last two weeks. 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, volume was comparatively high on the first and the last day; the index closed red both times.

Support/ Resistance, Price Action, and Macroeconomic, Political Interference

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 earlier part of the week, the index had found support at the 2,700 level. The index also showed signs of reversing upwards with two green days. However, numerous bad news circulated, and the index saw a rather painful decline as it closed for the week.

Russian President Vladimir Putin launched a full-scale attack against Ukraine on Thursday, as Ukraine itself claims. Russian missiles and airstrikes hit Ukraine’s capital, Kyiv, and more than a dozen other cities across the country Thursday. This came minutes after Russian President Vladimir Putin announced a military operation "to demilitarize and denazify Ukraine” and bring its leaders to trial.

Back at home, protesters clashed with the police in Baneshwor in opposition to the ratification of the Millennium Challenge Corporation. The U.S. foreign assistance has proved controversial and divisive. On top of this, Nepal Rastra Bank imposed a higher risk weight on share loans, which was yet another negative news as it translates to a reduction in margin lending.

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

On the upper side, the 2,780 level, 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.

Part 2: Insight into Important Data

More than 3.29 crores unit shares worth Rs 17.72 Arba have been traded through 2.59 lakh transactions this week. The current market capitalization of NEPSE stands at Rs. 3,769,631.73 million.

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

The NEPSE index declined by 2.60% this week. Only Hydropower sector gained this week.

Stocks with highest monthly Beta (Microfinance, Hydropower)

Wean Nepal Laghubitta Bittiya Sanstha Limited (WNLB) has the highest monthly Beta value of 1.23 followed by Forward Microfinance Laghubitta Bittiya Sanstha Limited (FOWAD) and Chhyangdi Hydropower Company Limited (CHL) with 0.83 and 0.70 beta values respectively.

Top Ten Gainers of the week:

United Idi-Mardi and R.B. Hydropower Limited (UMRH) is the top gainer of this week. UMRH closed at Rs. 1010 with Rs. 320 (46.38%) 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:

Grameen Bikas Laghubitta Bittiya Sanstha Limited's (GBLBS) price has decreased by 10.55% and its LTP stands at Rs. 890.

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

Jeevan Bikas Laghubitta Bittiya Sanstha Limited (JBLB) is the top traded company of the week. A total of Rs. 1.16 Arba worth of JBLB shares were traded this week.