QATAR: Technical analysis of the Qatar Exchange index

The QE Index had been hit hard in the past couple of weeks. After a big drop from 8,481.02 to 8,333.11, the index stabilized near its December low of 8,284.21, and recovered about 60% of the early-week losses to close the week at 8,422.26 (down by about 60 points, or 0.69%). The medium-term trend is down on this time frame, but strong price action over the last several trading sessions indicates that a near-term countertrend move is underway. A continued push toward the 8,450.0 levels, which is also near the March low, is quite possible. We believe a rise above 8,450.0 indicates that the index is bottoming out with possibility of a further rally. If that bullish situation develops, traders should watch out for a test of the moving averages (currently at 8,513.61 and 8,599.72). On the flip side, a drop below 8,284.21 will get traders thinking that the downtrend is continuing and volatility is likely to pick up further, especially if the index starts heading toward its 52-week low of 8,123.02. Meanwhile, both the RSI and the MACD lines suggest that the index is oversold at its current level, which is supporting the bottoming-out case.

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.

Source: Caye Global, Gulf Times


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