Market Couldn't Sustain Last Week's Premature Bounceback (Weekly Wrapup With Analysis of Market Movers, Brokers and Sector Comparison)

Fri, Feb 11, 2022 3:34 PM on Stock Market, Weekly Analysis,

-ShareSansar

Part 1: Rundown and Technical Analysis

The NEPSE index gained for a day and lost for four days in the five trading days this week. The market is closed on Fridays and Saturdays every week.

The NEPSE index closed at 2,801.56 this week after a loss of 75.18 points (2.61%). The index had closed at 2,876.74 last week with a gain of 3.48% from the week before that.

This week, the index went as high as 2,921.18 and as low as 2,791.10, hence witnessing volatility of 130.08 points. In the previous week, the index had seen volatility of 120.04 points.

Analysis of Trend

The NEPSE index is up more than 10% compared to the same date last year. However, it is down around 12% from the all-time high of 3,198.60 created around five months ago. Nonetheless, the index has bounced back around 23.76% after reaching the nearest intraday low of 2,259.63 on December 13 (a recent significant pivot low).

The index underwent a pullback of around 7% in the second-last and third-last weeks. Last week, the NEPSE index had tried to climb back up and reached very near the recent pivot high. However, the bearish sentiment prevailed this week, and the index closed lower.

Candlestick Charting

On the weekly candlestick chart, this week's market movement has formed a small red candle with a long upper wick. Last week's candle was a small green candle with a long upper wick. This week's candle is identical in size to last week's candlestick.

The first trading day (Sunday) this week saw strong bearish momentum, and the daily candlestick was long, red which opened at the intraday high and closed 40.57 points lower from last Thursday's closing. Although the bulls tried to fight back with a minimal gain of 0.55% the next day, a bearish mood eventually ensued, and the index closed red for the last three trading days this week.

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 50.04. The daily RSI chart has been downwards sloping this week, indicating a gradual decline in optimism. Meanwhile, the RSI reading on the weekly chart is 52.85, which has also been downwards sloping for the last four weeks. However, it should be noted that indicators have a lagging nature, and a single indicator can't be used to gauge market sentiment.

On the other side of things, the MACD line is positive, i.e. above zero in the daily timeframe, with the MACD reading at 31.73. However, it sloped downwards this week. The MACD line is below the signal line, indicating a decline in upwards momentum.

Volume

A chart reader can deduce investor sentiment with volume. Essentially, trading volume can legitimize a security's price action, which can then aid an investor in their decision to either buy or sell that security.

During market falls, the volume is dry and during bullish days, there is a general increase in volume.

This week, volume was average. The volume chart has sloped downwards, portraying a general decline as the week progressed.

Support/ Resistance and Price Action

First and foremost, there is no rigid rule to deduce support and resistance levels from a stock/ index chart. Technical analysis is more an art rather than hard science since it is an attempt to deduce market psychology after all. As is the case with human behavior, markets are largely unpredictable, subject to whims and instance changes in sentiment. The best a chart reader can do is deduce investing strategies using what has worked historically, and what gives a competitive edge even in securities other than those present in the sample data.

The resistance level is simply the price above which the index has had trouble moving up. Thus, the previous high (or a series of highs if they are on the same level) can be used as resistance. Meanwhile, if the stock or index chart has gone below the previous low, it can also be inferred as a resistance level, since the previous support level acts as resistance if the price/ index has broken below it.

On the other hand, the support level is simply the price below which the index has had trouble moving down. Thus, the previous low (or a series of low if they are on the same level) can be used as support. Meanwhile, if the stock or index chart has gone up the previous high, it can also be inferred as a support level, since the previous resistance level acts as support if the price/ index has broken above it.

For the week, the index has rested very near the most recent pivot low at 2,761.28, a level that may act as the nearest support. The previous pivot high at 2,925.05 and the one before it at 2,981.35, which also has historical credibility will act as the immediate resistance levels. The index will face higher resistance the higher it goes since it needs extraordinary market participation to surpass the all-time high.

The 50-day exponential moving average (50EMA) has historically acted as a support level for the NEPSE index. Last week, however, the index bounced back from a premature correction and did not test this level. On the previous weekly summary, it was mentioned that the correction would have been healthier if the index had tested the level. Its effect was thus seen this week, as the index failed to sustain the rise.

The NEPSE index has once again reverted back near the support level indicated by the 50EMA.

Part 2: Insight into Important Data

More than 4.56 crores unit shares worth Rs 24.44 Arba have been traded through 3.04 lakh transactions this week. The current market capitalization of NEPSE stands at Rs. 3,959,648.53 million.

NEPSE index and Sub-indices performance: (Increment based on previous week's close)

The NEPSE index declined by 2.61% this week. Only Others sector gained this week.

Stocks with highest monthly Beta (Microfinance, Commercial Bank, Hydropower)

Madhya Bhotekoshi Jalavidyut Company Limited (MBJC) has the highest monthly Beta value of 0.95 followed by Forward Microfinance Laghubitta Bittiya Sanstha Limited (FOWAD) and Mahuli Samudayik Laghubitta Bittiya Sanstha Limited (MSLB) with 0.58 and 0.54 beta values respectively.

Top Ten Gainers of the week:

Nepal Telecom Limited (NTC) is the top gainer of this week. NTC closed at Rs. 1624.8 with Rs. 64.80 (4.15%) increment.

All the analysis is done with the SS Pro Software. To know more about the software, click on the link below

SSpro

Top Ten Losers of the week:

Janaki Finance Limited's (JFL) price has decreased by 16.84% and its LTP stands at Rs. 575.5.

Top Stocks by Turnover, Volume, and Number of Transaction:

Arun Valley Hydropower Development Company Limited (AHPC) is the top traded company of the week. A total of Rs. 1.50 Arba worth of AHPC shares were traded this week.