NEPSE Index Declines, Market Returns to the 2700 Mark: What Does Technical Analysis Say?

On Tuesday, the NEPSE index dropped by 111.96 points, landing at 2782.60, bringing the market back to the 2700-point mark. The total trading volume for the day reached approximately NPR 18.64 billion, indicating a reasonably healthy level of activity. Except for the hotel and tourism sector, all other indices saw declines, with three companies hitting positive circuit levels.

Profit Booking Trend:

Short-term investors have become active in booking profits, leading to increased selling pressure in the market. The NEPSE index had seen a sharp rise over a short period, prompting some investors to book profits and exit the market, waiting for a re-entry opportunity. Political instability and statements from leaders are also believed to have impacted the market to some extent.

The profit-booking trend among large and institutional investors has also contributed to the selling pressure. However, with trading volumes remaining healthy, investors looking to buy during the dip have started to become active. Despite the market decline, experts suggest that investors should remain patient and strategically navigate the market's fluctuations.

Trend:

The NEPSE index had been showing an upward trend (uptrend) in recent times. However, the index has seen a decline in the last few trading sessions. Notably, the significant drop over the last two days indicates a possible trend reversal in the short term.

Support and Resistance:

Support Level: The 2700 mark is emerging as a significant support level. The index had previously found support at this level, and it might do so again. Resistance Level: The recent peak around 3050 is acting as a resistance area. If the market starts to recover, breaking through this resistance level will be crucial. Volume: Trading volume has remained stable in recent days, but the volume during the decline has been relatively strong, indicating pressure from both buyers and sellers in the market.

Candlestick Pattern:

The last two days of decline have formed a pattern resembling a "Bearish Engulfing" candlestick, which could signal further declines in the coming days. This suggests that selling pressure might continue in the short term.

Conclusion:

The NEPSE index appears to have entered a short-term downtrend. Liquidity and interest rate stability, along with potential impacts from political instability, could negatively affect the market in the near term. However, with strong support at the 2700 level, the market might find support and could start to recover afterward.

Investors might consider the current dip as a buying opportunity, but it is crucial to proceed with caution. If the support level is breached, further declines may occur. Therefore, investors should adopt a risk management strategy before making any moves.

On this day, more than 43.8 million shares of 330 companies were traded. Himalayan Reinsurance led the way with over NPR 654.2 million in trading, followed by Api Power and Arun Valley Hydropower in second and third place, respectively.