Monthly Technical Analysis of Nepse (May 24 to June 23, 2015)

  6 min 47 sec to read

Nepse Figure
Trend Analysis
The aftermath of the earthquake caused Nepse index to fall by 10.70%. Nevertheless, the index increased soon enough, rising by 15.43% halfway through last month. Currently, Nepse is at a correction period. Its immediate support level is at 919 levels, which could lead the index to bounce back towards a bullish trend. But if it falls way over its support level, it could follow a down trend. Nepse moved along with 180 moving average (MA) for the majority of last week, signifying that the 180 MA remains supportive to Nepse’s trend and also acting as an immediate support level. Currently, the index fell below the 180 days MA, indicating that the index could face possible difficulty to rise back up. 
Resistance and Support
As a result of the earthquake, Nepse broke all its support levels. The lowest Nepse index went down to was at 837.83. It crossed a little below its lower support level of 844.42. However, during the course of the month, the index surged and crossed above its support level of 938.41. Currently, its immediate support and resistance level stands at 919 and 938 respectively. If Nepse faces severe downfall and falls below support level of 919 on the historical price level, its next trend line support stands at 875.56. However, believing that the downfall towards the end of last month is due to various trend corrections, Nepse might possibly bounce back and cross over its immediate resistance level which stands at 972. 
Nepse Trend Indicator
a. Moving Average
Nepse’s volatility, as a result of the earthquake, has caused the short term (5 and 20 days) moving averages to move accordingly. During the middle of the month, 5 days MA crossed over the 20 and 180 days MA, indicating a bullish trend. Nepse index peaked at 966.59 at that period. At the end of the month, 5 days MA crossed below the 180 days MA, and it now stands between 20 and 180 days MA. The Nepse index is also moving along with the 5 day MA, indicating short term bullish trend is possible. This bullish period could gain more momentum if the index moves above the 180 days MA, since the 180 days MA was acting as a strong support level on third week of June. 
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 last month, the Macd line moved out of the negative territory, and also crossed over the Signal line. This line reached the lowest level of -24.84 at the beginning of last month, but towards the end of the month, it started to make a steady decline, nearing the zero level and moving closer to the signal line. Currently the Macd and signal line stand at 0.04 and -0.38 levels respectively. The recent position still indicates a bullish trend to continue for certain period. 
c. RSI
RSI 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. 
Towards the beginning of last month, the RSI reached the lowest level of 15.22 level, indicating a strong oversell condition in the market. During the course of the month, RSI also reached a higher high of 64 level, indicating a buying pressure at the market at that period. Currently it stands at 49.89 level, which is a neutral position. 
d. 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 are represented by calculating standard deviation. 
Through the course of last month, the index crossed over the lower Bollinger band, and reached midway between the upper and middle Bollinger bands. The Nepse index stayed between the middle and upper Bollinger bands for most of second half of the month. Currently, the index is still above the mid-Bollinger band, signifying a possible bullish trend. This bullish momentum would reverse if the index drops below the mid-band. The gap between the upper and lower Bollinger bands remains wide, indicating huge market volatility. However, the upper and lower bands seem to be steadily closing in.  
Volume Indicator (On-Balance Volume)
On-Balance Volume (OBV) measures buying and selling pressure at the market. It acts as a cumulative indicator that adds volume on up days and subtracts volume on down days. 
The market volume has been positive for the past month. Although the volume indicator declined during the second half of the month, it did not support the bearish trend as the OBV indicator did not fall as much as the Nepse index did. At the time of bullish period, the OBV rose higher than the index, indicating a positive volume pressure on Nepse until it rises to its resistance level of 972. During the past two weeks, the OBV fell more than the index, implying that the market is having a selling pressure. 
The Nepse index experienced great amount of volatility as a result of the devastating earthquake that hit the nation on 25th of April, 2015. As expected the benchmark index fell immensely for four consecutive days as soon as the market opened for trading. Surprisingly, the market picked up momentum and recovered the fall caused by the quake after 11 trading days. The fall witnessed by the market in the past 30 days is not as much as compared to the drop witnessed in the month prior. Nepse decreased by -12.1 points (or -0.94%) to close at 926.09. The 50-day moving average is moving below the 200-day moving average. This shows that the overall outlook of the market does not look good. However, this short term view of the market is likely due to various Nepse corrections. The average market volume increased to NPR 22.61 crores compared to the average volume of NPR 17.47 crores the month prior. 

No comments yet. Be the first one to comment.