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September 2017 Stock Taking

Published on: 2017-09-07 10:22:26     117 times read    0  Comments

Confusing Signals

Trend Analysis
The benchmark index lost 17.51 points (or down 1.06%) to close at 1611.57 last month. The index remains above the 50-day, as well as 200 day moving average, signaling the market to be bullish. However, Nepse hovering close to the 50-day MA will test the respective MA for support level. The average volume turnover increased to NPR 93.59 from NPR 77.69 crores the month prior. 

Resistance and Support

The benchmark index broke the immediate resistance level of 1645 towards the beginning of last month. However, during the second half of the month, the index fell towards the early 1600’s level. The new support and resistance level now stands at 1607 and 1746 level respectively. 

Nepse Trend Indicator
a. MACD
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. 

The MACD and the signal line, at the beginning of last month,stood at 13.68 and 6.20 respectively. In the course of the month,the macd line fell by 9.79 points where as the signal line climbed up by 4.77 points to close at 3.89 and 10.97 respectively. The macd moving below the signal line gives a bearish signal. Both the lines moving in the negative territory will further support the bearish signal.

b. 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. 

The RSI, at the beginning of last month, stood at 65.38 level. Towards the end of the month, it decreased by 25.22 points to close at 40.16 level. This fall in RSI shows that the market is moving towards the oversold zone. Falling further towards the 30’s zone will signal oversold condition.

c. 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. 

The benchmark index hovered between the middle and upper Bollinger bands for majority of last month. Towards the end of the month, the index fell close to the lower band, which shows a rise in selling pressure in the market. The distance between the upper and lower band remains constant, indicating moderate market volatility.

Overview
The benchmark index fell by 17.51 points (or down 1.06%) to close at 1611.57 last month. The index continues to hover above the 50-day, as well as 200-day moving average, showing a bullish sentiment in the market. The technical indicators, however, give bearish signals. The macd moves below the signal line and towards the negative territory. The RSI continues to fall towards the 30’s zone, signaling selling pressure in the market. The bollinger bands also support the rise in selling pressure as the index hovers close to the lower band. The bands also signify low market volatility. The new support and resistance level now stands at 1607 and 1746 respectively. 


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