NEPSE Forms ‘Dragonfly Doji’, Successfully Tests 200-Day Moving Average — Signs of Reversal Amid Correction Phase

After six consecutive bullish sessions, the NEPSE index declined for the second straight day on Monday and Tuesday. On Monday, the index dropped by 22.35 points, followed by a minor 0.14-point decline on Tuesday, closing at 2,683.86 points. The correction is attributed to short-term investors securing profits.

Along with the decline, trading volume also dropped. Monday saw transactions worth NPR 8.37 billion, while Tuesday’s turnover dropped to NPR 6.57 billion. A total of 150.27 million shares were traded across 56,276 transactions involving 304 stocks.

In terms of price movements, Butwal Power Company surged the highest with an 8.21% gain. Peoples Hydropower and River Falls Power also rose by nearly 6% and over 4.5% respectively. On the downside, Rasuwa Gadhi Hydropower fell by 5.08%, the steepest decline among all listed companies. Other decliners were mostly within a 4% drop.

Nepal Reinsurance Company (NRIC) led the market in turnover, recording trades worth NPR 516.7 million. Butwal Power and Guardian Micro Life Insurance also saw high turnover exceeding NPR 410 million, reflecting increased investor confidence in these stocks.

Among the 13 sub-indices, 7 ended positive while 6 declined. The Finance sub-index posted the strongest performance, rising by 1.25%. Other gainers included Trading, Non-life Insurance, Hydropower, Manufacturing, Microfinance, and Investment. Meanwhile, Banking, Hotels, Life Insurance, Mutual Funds, and Others saw marginal declines, indicating short-term instability in specific sectors.

Technical Analysis

On Tuesday (Asar 24), the NEPSE index formed a “Dragonfly Doji” candle — a notable technical indicator signaling potential trend reversal and market indecision. Following Monday’s bearish candle near resistance levels, Tuesday’s session closed above the crucial 200-day moving average (MA), confirming strong support at that level.

A Dragonfly Doji forms when the market dips intraday but recovers to close near the opening price, indicating strong buyer activity. Despite recent bearish signs, this technical pattern suggests possible market reversal supported by strong buying pressure, especially near the 200 MA line.

Hydropower stocks were particularly active towards the end of the session, helping limit the market’s downside pressure.

Broker Analysis

Among the top 10 brokers, 6 had higher buy volumes compared to sell, while 4 sold more than they bought. Broker no. 55 led the market with a turnover of NPR 1.63 billion. It posted NPR 900 million in buy orders and NPR 720 million in sell orders.

Interestingly, the same broker was involved in high-volume trades of NRIC — buying 333,000 shares and selling 221,000 shares. Investors suspect this might indicate matching or insider-driven activities.

The NEPSE index testing and bouncing off the 200-day MA while forming a Dragonfly Doji is a positive technical signal. The recent correction is seen as a healthy consolidation phase rather than a risk indicator.

If the market holds above this technical support and regains confidence, this correction could form the base for a sustainable uptrend. Investors are advised to take this opportunity to shift focus from short-term profit booking toward long-term investment strategies.