Monthly Technical Analysis of Nepse (August 26th 2018 – September 26th 2018)

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Volatile & Bullish

Trend Analysis
NEPSE index experienced high volatility in the course of last month. It gained 102.02 (or up 8.68%) to close at 1277.74 last month. Currently, the index is trading above 50 days moving average. However, the index is still moving below 200-day moving average. Last month, NEPSE broke the resistance level of the rectangle and showed bullish momentum trading outside of the channel level. Higher highs and higher lows were created with an increased volume indicating a presence of bullish trend in the market. The average volume turnover increased to NPR 54.65 crores from NPR 22.76 crores indicating an increased market participation. Last month, Nepal Stock Exchange started mock trading to acclimatize the brokers and investors in the online trading climate. Similarly, SEBON organized an interaction to address the issue of money laundering in the stock market.

Resistance and Support

NEPSE index has shown the bullish momentum in the market. In the course of last month, the index broke the immediate resistance level of 1224 and reached the high level of 1280.05. The immediate resistance and support have changed to 1277 and 1224 respectively.

Nepse Trend Indicator
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 –5.41 and -5.43 respectively. By the end of the month, the MACD and the signal line increased by 25.51 and 20.29 points to close at 20.11 and 14.86 respectively. The MACD line crossed the signal line from the below and both lines are moving in the positive zone indicating a bullish momentum in the market.

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 40.87 levels. In the course of the month, it gained 32.47 points to close at 73.34 levels. RSI crossed the level of 60s zone and tested the level of 70s zone twice. At the end of the month, RSI traded above the level of 70s zone and closed at 73.34 indicating a bullish momentum in the market.

c. (OBV)
On balance volume is a momentum indicator that uses volume flow to predict changes in stock prices.

It measures buying and selling pressure as a cumulative indicator that adds volume in up days and subtracts volume on down days.

On balance volume at the beginning of last month, stood at -9.9b level. In the course of month, it gained 3.3b points to close at -6.6b. The on-balance volume has increased by the 3.3b indicating a positive sign in the market. 

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.

At the beginning of the month, the benchmark index has breached the mid Bollinger band and recached the level of upper Bollinger band. Then after, the benchmark index is moving at the range of mid Bollinger and upper Bollinger band indicating a bullish momentum in the market. The distance between the upper Bollinger band and the lower Bollinger band has widen indicating a volatility in the market. 

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