Wednesday, August 2, 2023

Nepse Aug 2

Before the monetary policy announcement by the Nepal Rastra Bank (NRB), the share market was experiencing a healthy and steady growth, with stock prices increasing at a good pace. Investors and traders were optimistic about the market's performance and had positioned themselves accordingly.

However, the sentiment changed dramatically when the NRB declared a monetary policy which did not meet investors and traders’ expectation. As a result, the market experienced a significant fall, erasing much of the previous gains.

During this period, the market witnessed a false breakout at the 2200 level. A false breakout occurs when a stock or market index temporarily moves above a key resistance level (in this case, 2200) but fails to sustain that upward momentum, leading to a sharp reversal. Many traders who had entered the market during this breakout found themselves trapped at higher price levels as the market turned against them.

Amidst the bearish trend, the market eventually formed a hammer candlestick pattern today near a crucial support area. A hammer candlestick is a single candlestick pattern with a small body and a long lower shadow, resembling a hammer. This pattern suggests that sellers drove the price lower during the trading session, but buyers managed to push the price back up, indicating potential bullish reversal signals.

Additionally, technical analysis revealed the presence of hidden bullish divergence. Divergence occurs when the price of an asset moves in the opposite direction of a technical indicator, indicating a potential shift in the underlying trend. Hidden bullish divergence suggests that even though the market's price was making higher lows, the indicator was making lower lows, implying underlying strength and a possible reversal to the upside.

The combination of the hammer candlestick pattern near a critical support level and the presence of hidden bullish divergence can attract traders who are looking for potential opportunities to enter the market. These technical signals may indicate that the market has found support and could potentially reverse its downtrend and move upwards.

However, it's essential to approach such situations with caution, as market sentiment and fundamentals can still have a significant impact on price movements. Traders and investors should consider various factors, including the broader economic conditions, geopolitical events, and the NRB's future policy actions, to make informed decisions.

In conclusion, the subsequent formation of a hammer candlestick pattern with hidden bullish divergence near support can be seen as potential signals for traders to consider when evaluating market entry points. Nonetheless, proper risk management and thorough analysis remain essential in navigating the share market's volatile environment.






No comments:

Post a Comment