Monthly Technical Analysis of Nepse (1 November to 26 November, 2015)

  5 min 5 sec to read

Huge Fluctuations Ahead


Nepse Figure

Trend Analysis
For the first half of the month, the benchmark index moved sideways, hovering above its immediate support level of 1084. The index then reached a high level of 1109. However, for the second half of the month the index spiraled downwards, losing 48.03 points (or down 4.43%). The ongoing unrest in the southern border areas and political uncertainty has caused the only secondary market to follow a bearish movement. Nepse is still hovering between the 50-day and 200-day moving average (MA). If the decline continues and the index moves below the 200-day MA, the market could see a possible long term downward trend.  

Resistance and Support

Nepse after reaching an all time high of 1205, continuously fell for last 3 months. Now the immediate support and resistance levels stand at 1000 and 1083 respectively. Considering wider range of immediate support and resistance level, Nepse will face huge fluctuation in coming days. 

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 the month, stood at -17.92 and -9.35 respectively. Both the lines continue to slide down. Towards the middle of the month, mcad line crossed over the signal line, giving a possible bullish outlook. However, the trend reversed when macd fell below the signal line again. Towards the end of the month, macd and the signal line ended at -18.92 and -15.09 respectively. 

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. 

RSI at the beginning of the month stood at 32.99 level. During the month, it hovered around the late 30’s and early 40’s zone, indicating a neutral stance. However, by the end of the month it lost 5.13 points and fell below the 30 mark to end at 27.87 level. This suggests that the market is facing oversell 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 Bollinger bands saw significant changes in the course of last month. During the first half of the month, the benchmark index moved up towards the mid band, which suggested that the market was moving away from oversell condition. Conversely, the index fell further and closed below the lower band at the end of the month. The convergence of upper and lower bands shows that the market volatility has decreased significantly as compared to that of last month.

Volume Indicator (On-Balance Volume)
On-Balance Volume (OBV) is a momentum indicator that relates volume to the current price of the index or security. It 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. If a price increase is supported by OBV, it confirms an uptrend, whereas if a price decrease is supported by OBV, it confirms a downtrend. The Nepse index, as well as the OBV (On-Balance Volume) declined for majority of last month. The rate of decline experienced by OVB is not as much as compared to that of Nepse, which suggests that the bearish situation in the market does not seem to be as strong to continue in the long-run. The average monthly volume transactions decreased to NPR 20.94 crores from NPR 37.37 crores the month prior.  

The Nepse index followed a bearish movement for the most of last month. The benchmark index lost 48.03 points (or down -4.43%) to close at 1044.01. The 200-day MA indicates that the market is bullish in the long run, where as the 50-day MA shows market to be bearish in the short term. If the index continue to decline, and move below the 200-day MA, the market could see a long term bearish trend. The RSI closed at 27.87 level, indicating an oversell condition in the market. Market volatility has declined as the upper and lower Bollinger bands have converged. The macd indicates bearish sign as the macd line is below the signal line, and both of them are at the negative territory. The new support and resistance level stands at 1000 and 1083 respectively.

No comments yet. Be the first one to comment.