Monthly Technical Analysis of Nepse (26 December 2016 to 19 January 2017)
The benchmark indexcontinued to decline in the course of last month. The index lost 12.85 points (or down 0.87%) to close at 1462.56. Nepse continues to hover below the 200-day moving average, supporting the bearish sentiment in the market. The index is down 22% from its peak of 1881.45. The benchmark index lost a staggering 67.88 points in the first two days to reach the monthly low at 1407.53 on December 27, 2016. The market has been in a consolidation stage since then. Still, nervousness and market hysteria continues to drive investor’s bearish sentiment. The average volume turnoverdecreased to NPR41.38crores compared to NPR61.87crores the month prior.
The benchmark index breached the previous immediate support of1465 in the beginning of last month to create a new immediate support at 1407. Towards the end of the month, the index bounced from the new immediate support level of 1407 and hovered around 1460. The index created a new immediate resistance at 1480, hitting the resistance twice in the course of the last month. If no positive news seem to create a bullish trigger in the market, the index will hover between the support and resistance level of 1407 and 1480 respectively.
Resistance and Support
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 -43.75 and -43.89 respectively. In the course of the month, macd and the signal line gained 26.18 and 19.86 points to close at -17.57 and -24.03 respectively. Both the lines continue to hover in the negative territory, but the macd line crossing over the signal line from below,indicates a slight change in bearish sentiment in the market.
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 30.86level. In the course of the month, it increased by 10.92 points to close at 41.78level. The RSI moving away from the 30’s zone shows that the market is experiencing a decrease in selling pressure.
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 closer to, the lowerbollinger band in the beginning of the last month, and moved to the mid bollinger band towards the end of the month, signifying an ease in oversold condition in the market. The distance between the upper and lower bands converged towards the end of the month, which showed a decrease in market volatility.
The benchmark index declined by12.85 points (or down0.87%) to close at 1462.56 last month. The index continues to show bearish presence as the benchmark index is still below the 200-day moving average. The 50-day MA crossed over the 200-day MA from above, further supporting the bearish sentiment.The macd indicator is moving above the signal line, which indicates improved investment sentiments of the market. The RSI has moved away from the oversold zone as it closed at 41.78level. The bollinger bands show a possible decrease in market volatility. The new support and resistance levels stood at 1407 and 1480 respectively.