Does The Market Go “Boom-Boom” After A Significant Increase In Nepse Index And The Turnover? (Historical Data Analysis Of The Market Trend of Nepse)
Tue, Jul 12, 2022 4:17 PM on Technical Analysis, Stock Market, Exclusive,
Stock market investment strategists use the probability theory to minimize the risk exposure while trading in the stock market. Technical analysts use market statistics and trends to analyze and predict the price movement in the stock market. The key underlying assumption of technical analysis is that the price movement occurs in a pattern and tends to repeat over time i.e., history repeats itself.
I have tried to analyze the trading pattern of NEPSE investors based on the trading day price and volume change. I have gathered the historical data of NEPSE (Daily Index data) of all trading days from 29/06/2020 to 28/06/2022 (2 Years’ time frame) and analyzed based on the extreme increase or decrease situations in the index.
Some Interesting findings are:
1. When the Market increases by more than 2 % in a day and the turnover of the day increases by more than 50% of the Previous day,
A high increase in the index (>=+2%) and turnover (>=+50%) in the same day does seem to be a very happy situation in Nepse. In a 15 days trading period: Out of 25 instances observed in NEPSE over the selected data set, in 20 instances, the market has increased. In 15 instances out of 20, the market has increased by more than 5%.
2. When the Market increases by more than 2 % in a day and the turnover of the day decreases by more than -25% of the Previous day,
A high increase in the index (>=+2%) and high decrease in turnover (<=-25%) on the same day do seem to be a happy situation in Nepse. In a 15 days trading period: Out of 5 such instances observed in NEPSE over the selected data set, in 4 instances, the market has increased. In all such 4 instances, the market has increased by more than 5%.
3. When the Market decreases by more than -2 % in a day and the turnover of the day increases by more than +25% of the previous day,
In the selected criteria, mixed observations were noted. In a 15 days trading period: The market has increased in 6 out of 12 such instances and decreased in the same 6 out of 12 instances.
4. When the Market decreases by more than -2 % in a day and the turnover of the day decreases by more than -15% of the Previous day,
A high decrease in index with a significant lowering of turnover does not seem to be the expected market scenario. In a 15 days trading period: Out of 5 such instances observed, the market has decreased in all 5 instances. In 3 out of 5 instances, the market has decreased by more than -5%.
We can always capitalize on the opportunities in the market for our benefit. However, most investors tend to move with the crowd sentiment and fail to take their own investment decisions. Even though the market movement is based on the change of several factors, the historical data analysis will help us to prepare the mindset and predict the market movements to some extent.
Note: D1, D2, D3 are the immediate succeeding trading days from the date of occurrence of the event.
The data is extracted from the official website of Sharesansar and the data analytics is done based on the criteria mentioned. The writer does not take a 100% guarantee of the accuracy of the presented data and advice the investors to perform their own analysis before making investment decisions.
CA Bimal Dhungel
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