Monthly Technical Analysis of Nepse October 2014

  3 min 56 sec to read

Market Trend
Nepal Stock Exchange (Nepse) index continued spiralling downwards during the August 19 to September 18, 2014 period, just like the preceding period. During the review period, Nepse fell by 134.5 points (-13 per cent) to close at 899.89 points. This severe drop was witnessed as the Nepse fell below its 50-day moving average on Aug 22, 2014 thereby indicating sell signal in the market. As the stock market broke multiple support levels, new support level emerged at 866.25 points. At present the resistance level for Nepse stands at 920.06 points. The average daily turnover of Nepse has also decreased and registered NPR 454.6 million against NPR 529.2 million during the previous period. The continuous drop in trading volume indicated that the investor's enthusiasm towards the secondary market has been declining since the last few months. After witnessing huge correction Nepse began to move along the sideways direction.
Relative Strength Index (RSI) is one of the leading indicators that are believed to be most effective during periods of sideways movement. Such indicators may create numerous buy and sell signals that are assumed to be useful when the market is not clearly trending in either direction. 
The RSI, which was in downward move since the beginning of the period reached the oversold zone on Aug 25, 2014. On the very successive day, RSI reached its lowest point, 22.50 levels during the review period. Since then, it has slightly improved and mostly hovered in the lower neutral zone and settled at 36.84 levels by the end of the current review period. The chart of RSI indicates that the persistent selling pressure, which was witnessed in the early stage of the review period has gradually declined during the latter period. 
The MACD is a momentum oscillator, which is formed by using two different types of moving averages (MACD and Signal Line) in order to chart specific buying or selling signals in the market. When a MACD line crosses above the signal line, it is considered to be a sign rising trend and indicates a buying signal and vice-versa. 
The MACD line still accelerating downward direction in the negative territory as it moved below the zero level. This further signalled bearish momentum in the market suggesting high selling pressure is persistent among investors. During the end of the period, the MACD line began gradually moving upwards and touched the Signal line. If the MACD line crosses above the Signal line, it would generate a strong buy signal in the market.
Bollinger Bands
The Bollinger Band is also a technical indicator that consists of 21-days moving average along with two trading bands (one above and one below). The bands are considered as an indication of volatility in the market, which is measured by calculating standard deviations. 
During the review period since Nepse crossed below the mid-band and continued spiralling downwards. Moreover Nepse index crossed below the lower band on two separate occasions of this period. However, over the last two weeks of the period Nepse began moving sideways and approaching the mid-band. Once it crosses above the mid-band, it would indicate buy signal in the market. 
The secondary market witnessed one of the biggest monthly declines in recent times as the Nepse index saw a massive decline of 134.5 points to close at 899.89 points. The market gathered downward momentum, as the buying pressure has remained weak over the last two months. This is evident in the declining volume in the market. During this period, the average daily volume registered NPR 454.6 million, which is much lower than that of the previous periods. The Nepse index is currently hovering between its immediate support and resistance levels of 866.25 and 920.06 points respectively. The RSI and MACD, which were in a continuous decline during the first half of the review, witnessed a gradual improvement. As the Nepse is gradually moving towards the mid-band of the Bollinger Bands the market appears to be stabilizing in the near term. However, there has to be a positive change in the trading volume to gather upward momentum in the market. 

No comments yet. Be the first one to comment.