Technical analysis of the QSE index
The QSE Index reversed its direction and closed the week gaining 523.69 points and closing on this week’s high. The bullish move started from the strong support around the 13,000 psychological level. This bounce is confirmed with a bullish attitude registered on the RSI while the MACD is also showing signs of strength especially after the weak performance the index experienced over the past month. Breach of the down trend line created from the bearish leg is also a sign of having the bulls back into play. The strength of the bulls should be confirmed by crossing the 55-day and 21-day moving averages. Otherwise, we might experience another round of selling pressure that may send the index back the 13,000 points or possibly lower.
The QSE Index continued its southbound journey for the third straight week and ended lower losing around 889 points, caving under sustained selling pressure. Moreover, the index penetrated below 13,000.0 for the first time since July providing a bearish signal. Meanwhile, the sharp losses registered on Sunday, Wednesday and Thursday were mainly responsible for dragging the index below many important psychological supports along with the 55-day moving average. This shows that the index is indicating a clear intermediate corrective trend, as it has been recording lower tops and lower bottoms since mid-September. On the downside, the index has its important psychological support at 12,900.0 which should not be breached, if it attempts to rebound. However, any sustained weakness below 12,900.0 may result in additional selling pressure, which will drag the index toward 12,770.0, followed by the 12,680.0 level. We believe the bulls have now been trapped, and the bears may continue to dominate until the index stays below the 13,000.0 level. Further, both the momentum indicators are in downtrend mode with no immediate trend reversal signs, suggesting the continuation of this weakness.
Definitions of key terms used in technical analysis
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.
