Weekly Summary: NEPSE Came out of the Week Stronger, How Will the next Move Look Like?


Part 1: Rundown and Technical Analysis

The NEPSE index gained for four days and lost for a day in the five trading days this week. The market is closed on Fridays and Saturdays every week. The NEPSE index closed at 2,857.75 this week after a gain of 165.28 points (6.14%). The index had closed at 2,692.47 last week with a gain of 6.65% from the week before that.

This week, the index went as high as 2,874.80 and as low as 2,699.87, hence witnessing volatility of 174.93 points. In the previous week, the index had seen the volatility of 170.06 points.

Analysis of Trend

The NEPSE index is up more than 25% compared to the same date last year. However, it is down more than 10% from the all-time high of 3,198.60 created around four months ago. Nonetheless, the index has bounced back around 26% after reaching the nearest intraday low of 2,259.63 on December 13 (most recent pivot low).

Candlestick Charting

On the weekly candlestick chart, this week’s market movement has formed an extended green candle with no lower wick. Last week too, the weekly chart had formed an extended green candle.

The first trading day (Sunday) this week formed a promising green candle, a gain of 2.71% on the index. The index kept gaining in the next two trading days. The bullish sentiment then seemed to have fizzled out, as the index lost 30.51 points on Wednesday. However, the bulls dominated the trading session on Thursday, and the index gained 54.13 points.

Thus, the daily market movement closely resembledΒ the action seen last week but with even higher market participation.Β 

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 68.94. It should be noted that the index crossing over 70 does not immediately indicate the possibility of a downtrend, although it denotes overbought conditions. Stocks and indices frequently venture in and out of the 70-100 zone during an uptrend. Meanwhile, the RSI reading on the weekly chart is 56.70.

On the other side of things, the MACD line is positive, i.e. above zero in the daily timeframe, with the MACD reading at 6

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