Technical analysis of the QSE index

The QSE Index extended its rally for the third straight week and ended gaining around 365 points to close near the 13,300.0 psychological level. The index made a weak start to the week, but gained momentum in the remaining trading sessions as it rose in four out of the five sessions. This has helped the index to climb above its important psychological levels of 13,000.0, 13,100.0 and 13,200.0. Meanwhile, the index has been in upmove mode and is registering strong gains over the past few days. We believe the index may continue its bullish momentum and proceed towards the 13,350.0 -13,400.0 levels. This is an important level to watch out for traders as any move above these levels may see the bulls go berserk and push the index to test the 13,550.0-13,600.0 levels. Further, both the momentum indicators are providing bullish signals and are showing no immediate trend reversal signs indicating that the index may continue its acceleration. On the flip side, any failure to move above the 13,350.0-13,400.0 levels may result in a range-bound move. Traders may need to keep a close watch on the support near 13,200.0 as any retreat below this level may drag the index to test the 13,080.0 level. Thus, traders may continue to remain bullish, but are advised to follow the support levels.

Definitions of key terms used in technical analysis

RSI (Relative Strength Index) indicator — RSI is a momentum oscillator that measures the speed and change of price movements. The RSI oscillates between 0 to 100. The index is deemed to be overbought once the RSI approaches the 70 level, indicating that a correction is likely. On the other hand, if the RSI approaches 30, it is an indication that the index may be getting oversold and therefore likely to bounce back.

MACD (Moving Average Convergence Divergence) indicator — The indicator consists of the MACD line and a signal line. The divergence or the convergence of the MACD line with the signal line indicates the strength in the momentum during the uptrend or downtrend, as the case may be. When the MACD crosses the signal line from below and trades above it, it gives a positive indication. The reverse is the situation for a bearish trend.

Candlestick chart — A candlestick chart is a price chart that displays the high, low, open, and close for a security. The ‘body’ of the chart is portion between the open and close price, while the high and low intraday movements form the ‘shadow’. The candlestick may represent any time frame. We use a one-day candlestick chart (every candlestick represents one trading day) in our analysis.

Doji candlestick pattern — A Doji candlestick is formed when a security’s open and close are practically equal. The pattern indicates indecisiveness, and based on preceding price actions and future confirmation, may indicate a bullish or bearish trend reversal.