Technical analysis of the QE index

The QE Index continued its uptrend for the second consecutive week and gained around 139 points to close above the 9,950.0 mark for the first time since August, thus signifying strength. The bulls were in full control last week and pushed the index closer to the 10,000.0 psychological level. The index paused just for a single day on Sunday and registered gains on each day thereafter to surpass the 9,900 level on the back of strong buying interest. We believe the index is currently in uptrend mode and may continue to move higher to test and clear the 10,000 level, targeting the 10,100 mark as it has strong momentum going in. Moreover, the RSI is moving up strongly and has enough room before getting overbought, while the MACD is diverging further away from the signal line in a bullish manner, indicating that this rally may not fizzle out soon. On the downside, the 9,900 level may act as a support area for the index. If the index penetrates below this level, it would present a good opportunity for the buyers to step in near the 9,850-9800 band. Thus, traders could adopt a bullish approach and may continue to buy on every possible dip.  

 

Definitions of key terms used in technical analysis

R

SI (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.

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