Technical Analysis Monthly (Jan 20, 14 – Feb 19, 15) : Bullish Signal for Long Term

  3 min 32 sec to read

Market Trend
After the huge gains witnessed in the previous periods, Nepse remained almost flat during the past 30 days. However, there was an overall positive gain in the market as Nepse increased by 7.2 points (or 0.74%) to close at 982.65 points. It was able to move past the resistance level of 972.17, which is now the new support level. At present, the nearest resistance level stands at 1036.98 points. There was significant improvement in market volume during this period as the average daily volume stood at NPR 39.84 crores. And, during this period, the 50-day moving average crossed above the 200-day moving average suggesting that the overall long-term market scenario remains bullish. 
Relative Strength Indicator is a form of leading indicator that is believed to be most effective during periods of sideways movement. Such indicators may create numerous buy and sell signals that are useful when the market is not clearly trending upwards or downwards. 
During this trading period, the RSI mostly hovered around the overbought line. During the first half of the period, the RSI remained slightly above the 70 levels; however, it gradually fell below the line during the second half. By the last trading day, the RSI stood at 62.44 levels.
The MACD is a momentum oscillator formed by using two different types of moving averages, which provides specific buying or selling signals. When a MACD line crosses above the signal line, it is considered to be a positive sign and indicates a time to buy, and vice-versa. 
During the initial part of the period, the MACD line hovered above the Signal line but it gradually crossed below it during the middle of the period. This movement below the Signal line suggests that there may be downward momentum in the market in the short term. 
Bollinger Bands
The Bollinger Band is a technical indicator that consists of a moving average (21-day) along with two trading bands above (upper band) and below it (lower band). The bands are an indication of volatility, which is represented by calculating standard deviation. 
The recent sideways movement of the market has caused Nepse to touch the mid-band – which currently acts as a support level. Due to horizontal market movement, the upper and lower bands have begun to converge. This represents low volatility in the market.
Though Nepse managed to end on a positive note, it could not continue the stellar performance witnessed during the previous periods. As the January 22 deadline for Constitution drafting process ended without making any progress through political consensus, the investor sentiment remained sour during the timeframe.  The market trended horizontally but witnessed positive gains of 7.2 points (or 0.74%) to close at 982.65 points. The market volume saw major improvement this period with investors trading NPR 39.84 crores each day on average. However, this figure is distorted due to bulk transactions of auctioned Nepal Investment Bank promoter shares. The new resistance and support levels stand at 1036.98 and 972.17, respectively. The RSI hovered above the overbought zone but gradually declined to the neutral zone by the end of the period. The MACD indicator indicates a possibility of a short pullback in the near term. The Bollinger Bands suggest a decreasing volatility in the market. However, the 50-day moving average crossed above the 200-day moving average during this period. This suggests that the long-term market scenario remains positive. 

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