NEPSE Concludes Week With 2 Days of Vigorous Market Activity and 2 Days of Indecision (Weekly Summary With Broker Comparison, Sector Analysis, and Highlights)

Fri, Dec 31, 2021 3:39 PM on Stock Market, Weekly Analysis,

The NEPSE index gained for two days and lost for two days in the four trading days this week. The market was closed on Thursday on the occasion of Tamu Lhosar. The NEPSE index closed at 2,524.50 this week after a gain of 4.27 points (0.17%). The index had closed at 2,520.23 last week with a gain of 6.04% from the week before that.

This week, the index went as high as 2,615.47 and as low as 2,487.41, hence witnessing volatility of 128.06 points. In the previous week, the index had seen the volatility of 195.15 points.

Analysis of Trend

The NEPSE index is up more than 25% compared to the same date last year. However, it has lost more than 20% from the all-time high of 3,198.60 created around four months ago. Nonetheless, the index has bounced back around 11.6% 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 a small-body red candle with relatively longer wicks on both sides. Last week, the weekly chart had formed an extended green candle.

The first trading day (Sunday) this week formed a promising green candle, a gain of 2.82% on the index. However, the second candle formed on Monday opened higher but closed lower than the previous candle's open with higher volume, hence forming a Bearish Engulfing candlestick pattern. The bullish sentiment then seemed to have fizzled out, as the next two days saw little progress and closed very near their respective opening level.

Moving Averages

The index has closed only a tad bit higher than the 20-day Exponential Moving Average and the 5-day EMA.

Furthermore, the 5-day EMA went above the 20-day EMA for the first time this week, and the crossover is intact as of the last trading day. The 5 days EMA had previously crossed below the 20 Days EMA on November 25.

The 200-day simple moving average (SMA) is also considered a key indicator by traders and market analysts for determining overall long-term market trends. The price went below the 200-day SMA on November 23. When a stock price moves below the 200-day moving average, it's considered a bearish signal indicating a downward trend in the stock. The index is still a long way below the 200-day SMA.

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 49.17. The RSI reading breaking above 50 would indicate intermediate-term upwards. Meanwhile, the RSI reading on the weekly chart is 43.12.

On the other side of things, both the MACD line and the signal line are negative, i.e. below zero in the daily timeframe, with the MACD reading at -33.08. Nonetheless, the MACD line has crossed above the signal line, even though both are negative, hence indicating the shallow possibility of bullish sentiment in the market.

However, the MACD crossover would have been more decisive if the MACD reading was positive. This quote is worth mentioning:

“Traders who attempt to profit from bullish MACD crosses that occur when the indicator is below zero should be aware that they are attempting to profit from a change in momentum direction, while the moving averages are still suggesting that the security could experience a short-term sell-off. This bullish crossover can often correctly predict the reversal in the trend, but it is often considered riskier than if the MACD were above zero.”

Support and Resistance

There is no rigid rule to deduce support and resistance levels from a stock/ index chart.

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.

With these considerations, the NEPSE index has bounced back after reaching a high of 2,615.47 this week. Hence, this level may serve as the nearest resistance, since it is the most-recent extreme point. The index is inside the possible resistance channel of the 2,500-2,540 range. Further resistance may be witnessed at the 2,670 index level and then at the 2,800-zone.

By joining the highest-possible number of past pivot points, it can be inferred that the 2,365-level may act as immediate support. The next support area may then lie at the most-recent pivot low, i.e. at the 2,259.63-level.

Fibonacci Retracement

Meanwhile, one can also draw the Fibonacci Retracement from the major-trend extreme points to ascertain the S/R levels. In this instance, we have taken 1,093.07 index level as the extreme-low and 3,193.16 as the extreme-high.

On these assumptions, the index broke up from the resistance zone at 2,390.93 last week. Significant resistance may be found higher at 2,697.54 and then at the ultimate peak, i.e. 3,193.16.

On these very assumptions, the nearest major support is at 2,390.93, and then at 2,143.11.

Weekly Market Summary of NEPSE:

More than 3.03 crore unit shares worth Rs 17.52 Arba have been traded through 2.14 lakh transactions this week. The current market capitalization of NEPSE stands at Rs. 3,567,348.09 million.

NEPSE index and Sub-indices performance: (Increment is based on the previous week closed value)

The NEPSE index increased by 0.17% this week. The manufacturing and Processing sector gained the most this week with an increment of 6.76%.

Stock with the highest monthly Beta value from the Microfinance and Non-life insurance and Hydropower.

Samling Power Company Limited (SPC) has the highest monthly Beta value of 0.88 followed by Dibyashwari Hydropower Company Limited (DHPL) and Shikhar Insurance Company Limited (SICL) with 0.49 and 0.48 beta values respectively.

Top Ten Gainers of the week:  

Madhya Bhotekoshi Jalavidyut Company Limited (MBJC) is the top gainer of this week. MBJC closed at Rs. 146.4 with Rs. 46.4 (46.40%) increment.

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


Top Ten Losers of the week:
Mahalaxmi Bikas Bank Limited's (MLBL) price has decreased by 22.01% and its LTP stands at Rs. 446.10.

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

Nabil Bank Limited (NABIL) is the top traded company of the week. A total of Rs. 1.35 Arba worth of NABIL shares were traded this week.

Top Buyers Brokers of the Week:

Vision Securities Pvt.Ltd (Broker No- 34) was the top buyer broker of this week and it has bought stocks worth Rs 87.11 Crores.

Top Buyer Brokers Top 10 Bought Companies:

Top Seller Broker of the Week:

Naasa Securities Co.Ltd (Broker No- 58) was the top seller broker for this week. The brokerage firm has sold stocks worth Rs 2.06 Arba.

Top Seller Brokers Top 10 Sold Companies:

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


Yearly Highlights

The NEPSE index has concluded the year 2021 with a 437.23 points gain.

The index had closed at 2,087.27 on the last day of the year 2020, hence creating the all-time high for that time. This had resulted in a gain of over 75% for the year 2020. This year, the index closed at 2,524.5 on the last trading day on Wednesday of this week. Thus, the index has gained slightly over 20.94% in the year 2021.

Image: Logarithmic Candlestick Chart of NEPSE Index. Each candle represents 6-months. This is where the index stands in the bigger picture. Notice the cyclical nature of the index.

As of the last day of the year 2021, we have 47,81,438 total Demat accounts in the country. 38,93,676 have activated their Meroshare accounts.