Weekly technical analysis of NEPSE index. Know all the important levels for next week

 The technical indicators we have used here are Exponential Moving Averages (EMA), Bollinger Bands (BB), and Relative Strength Index (RSI), Volume Chart, Fibonacci retracement and Moving Average convergence & divergence (MACD).

We are here with weekly technical analysis of NEPSE index (time period of charts are from March to June's first week of 2018).

Candlestick pattern: On weekly candle stick, type of bearish marubozu pattern had formed which signifies a downtrend and Thursday's candlestick, formed a bearish engulfing pattern, which is an indication of bearish trend. Considering a day to day candlestick pattern, only one day’s pattern was bullish.

Bollinger Band: Bollinger band is shown in main candle stick chart of NEPSE; it is used to predict volatility as well as market trend.

Bollinger band is made up of three lines viz. upper band (red line, on the upper side), lower band (red line, on the lower side) and middle line (black, on the center).

Now focus at these three lines, space between the upper band and lower band is increasing, which means market will be more volatile. Investors often wrongly interpret Bollinger bands as when candle touches the upper/lower band, it is a sign of reversal but the truth is Bollinger bands don’t predict the reversal of trend(it predicts continuation of trend). When candle cross the lower limit, it is a strong sign of continuation of market trend.  If you look at the picture, NEPSE index had broken the lower band of the Bollinger band which means selling pressure will be more in the market. On addition, NEPSE index is not able to trade above the middle line, which means market is bearish.

EMA : Exponential moving average is used to predict continuation and reversal of the trend. We have used three major EMA of  5 days(blue) ,20 days(green) , and 180days(yellow, above the upper band of bollinger bands).

Both EMA(5) and EMA(20)  are above the NEPSE index value and are giving an immidate resistance to it. EMA(180) is far above the current value of NEPSE and other two EMA’s are also above the current NEPSE index value, which means long term,mid-term as well as short-term market trend is downward. Short term EMA’s is below the long term EMA’s which is a strong bearish signal.

Volume turnover: Average volume turnover of last three months is around Rs 47 Crore  and NEPSE index was traded around the Rs 40 Crore turnover in last 1 week which means investors are discouraged to enter into the market. 

RSI: Relative Strength Index is used to indicate over-bought (too high price) and over-sold (too low price) price of the stock and it is used for detection of divergence in the prices. Chart below shows a NEPSE candle stick and RSI indicator, the chart at the lower side is the RSI indicators. When it touches the upper limit of 70 it is said to be over-bought and when it touches the lower limit of 30, it is said to be over sold. Both over-bought and over-sold indicates a reversal in the current trend but in practical cases, majority of time it reverses after travelling some distance rapidly above/below said limits. As you can see, RSI is around 34 just above the over-sold position that means we could see some quick downtrend. Divergence is not observed.

MACD: Chart below is Moving Average Convergence & Divergence. MACD is used to predict market trend. In the chart MACD line (red) is below the signal line (blue dotted). The space between the MACD line and Signal line is increasing which indicates, bearish trend is heating up. Again, as signal line is above MACD line, over-all market trend is downward.

Fibonacci retracement: NEPSE index is trading at 1257.07 points, just few points below the Fibonacci golden ratio retracement of 61.8% at 1259.52 points.

Red lines, both dotted and normal lines show the different level of retracement percentage.

Currently, the NEPSE index is trading in the boundary of last major support, so if it breaks that level, then clearly next major support is at around 1135 points.

Conclusion: All the indicators are signaling a bearish trend as well as indicating high volatility so we could see some big bearish candle next week.

As predicted in our last weekly technical analysis, we saw support breakout. Our  technical analysis predicts the continuation of the bearish trend for next week.

This week’s market statics.

Week high – 1307.66, Week Low – 1256.75

Week opening value -1307.66, and closed value -1257.07

 Following are the major Support and Resistance level according to Pivot point of 1273.8. When pivot point lies above market price investor’s sentiment will be negative.

1^St resistance- 1290.85,       1^st support – 1239.94

2^nd resistance – 1324.71,     2^nd Support – 1223.21