Weekly technical analysis of NEPSE index; know the details about the market trend next week

In this analysis we have used volume, RSI, Exponential moving averages (EMA), Bollinger bands and MACD for the prediction. The chart we have used is candle-stick pattern of one day period.

Candlestick pattern:  Candle with small bodies was observed this week. We saw few bullish candles as well but the bodies of those candles are relatively smaller than the bearish one. The small body candle signifies a lack of decision in the market. In the bearish market, small body candlestick indicates that there is a possibility of a reversal in the current market trend. Last day’s Candle is dozi like pattern and that supports the reversal of the trends. From candlestick pattern a soft hint for the end of the short-term bearish trend was observed.

EMA : Exponential moving average is used to predict continuation and reversal of the trend. We have used three major EMA of  5 days(red) ,20 days(green) , and 180days(black).

These three EMA’s are above the market price implying the short-term , long-term and mid-term trend is bearish.  Short term EMA’s are below the long term EMA’s which is a strong bearish signal.  Moving averages is giving indication for the continuation of the trend.

Bollinger Band: Bollinger band is shown below with NEPSE main chart. It is used to predict volatility as well as the market trend.

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

Look at these three lines, the lower and upper band is looking parallel to each other and that means next week’s volatility likely to be similar to this week’s volatility. If you look at the picture, NEPSE index is not able to trade above the middle line (SMA of 20 days) in last couple of months, which simply means market is bearish.

Volume: We can see, the volume chart and price chart is  parallel. In the figure below,we can see that the NEPSE index along with volume has decreased in last couple of weeks. Decreased in price with decreased in volume supports bearish trend in uni-directional market like NEPSE.

RSI: The RSI chart with NEPSE main chart is shown below .Relative Strength Index is used to indicate over-bought (too high price) and over-sold (too low price) price of the stock and divergence of the price. Red line chart in the below figure is a RSI indicator, 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. As you can see above, NEPSE index was traded in the over-sold zone this week and RSI is indicating reversal of the trend.

MACD: Chart below shows the Moving Average Convergence & Divergence with the NEPSE main chart. MACD is used to predict market trend.

In the chart above, MACD line (red) is below the signal line (blue dotted) indicating bearish trend. MACD line and Signal line is converging which indicates slow-down of the bearish trend.

This week’s market statics:

Open – 1248.07 points, closed -1218.46 points

High – 1248.07 points, Low- 1211.31 points

Conclusion: Most of the indicators are pointing for the continuation of the bearish trend but the formation of the small body candles and RSI are supporting the uptrend. For this we suggest investors to stay away from the trade as assured direction of short-term trend is not defined and long-term trend and mid-term trend is still bearish.

Important support and resistance level for next week.

Pivot point - 1225.94 points,

1^st resistance -   1240.57 points,                     1^st support – 1203.81 points

2^nd resistance – 1262.70 points,                      2^nd support-1189.18 points