Weekly technical analysis of NEPSE index; traces of uptrend has observed this week

This week the pace of NEPSE downward has reduced, however the week’s opening price stands as the week’s high. The weekly candle-stick was a kind of hammer candlestick pattern, the pattern holds a good weightage as it appeared in the downtrend. From the weekly candle-stick pattern we can expect an uptrend next week.

The indicators we have used here are volume chart, RSI, exponential moving averages, Bollinger bands and moving averages for the prediction. The chart we have used is candle-stick pattern of one day period.

Candlestick pattern:  Candle with small bodies was observed excluding first-day candle stick pattern. Candle with small bodies at the downtrend gives soft-signal for an uptrend.

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(red) , and 180days(green).

EMA(20)  is above the NEPSE index value and is giving resistance at 1282.94 points and EMA(180) is far above the current value of NEPSE,which means long term as well as mid-term market trend is downward. EMA(5) is very near to the NEPSE index ,so we could say that the short-term trend is not bearish.

Short term EMA’s are below the long term EMA’s which is a strong bearish signal.

Bollinger Band: Bollinger band is shown below under the blue shaded part. It is used to predict volatility as well as the market trend.

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

Now focus at these three lines, that lower and upper band are diverging but upper band for this week is like a straight line and lower band is going down-ward which means NEPSE index volatility could be moderate next week. If you look at the picture, NEPSE index is not able to trade above the middle line in last one month, which simply means market is bearish.

Volume: The volume chart and price chart is  diverging. In the figure below, price has increased and volume has decreased in last four days which means 15 points upward movement of Nepse index was not supported by the volume.

RSI: Relative Strength Index is used to indicate Over-bought (too high price) and over-sold (too low price) price of the stock and divergence. Line chart in pink shaded part 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, RSI had hit the over-sold level of 30 on the first trading day and then market started moving upward. RSI on the Thursday stands at 35.93; it is supporting an uptrend next week.

MACD: Chart on the lowermost part of the picture is Moving Average Convergence & Divergence. MACD is used to predict market trend. In the chart MACD line (blue) is below the signal line (red) making a negative histogram.

Histogram had decreased comparing to last few days and MACD line and Signal line is converging which indicates slow-down of the bearish trend. But as signal line is above MACD line which means over-all market trend is still downward.

This week’s market statics:

Open – 1257.16 points, closed -1247.30 points

High – 1257.16 points, Low- 1224.00 points

Conclusion: Indicators are giving mixed signal, but the candle-stick pattern giving more weightage to the uptrend and pivot point is also below the market price which expresses positive sentiment for investor. Contrary to last week’s prediction of downtrend, next week we predict slow bull market next week or type of side-ways market.

Important resistance and support level according to pivot-point 1242.82.

1^st resistance – 1261.64, 2^nd resistance-1275.98,

1^st support – 1228.48, 2^nd support -1209.66.