Monthly Technical Analysis of Nepse (20 January to 21 February 2017)

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In Oversold Zone

Trend Analysis
The benchmark index took a bearish ride at the beginning of last month, dropping as low as 1252.5 level. In the course of the month, Nepse lost a staggering 104.99 points (or down -6.93%) to close at 1357.57. Uncertain political environment and higher fixed deposit rate by the banks continues to create bearish sentiment in the market. The index continues to hover below the 200 day and 50 day moving average, supporting the bearish sentiment. The average volume turnover increased to NPR 47.59 crores from NPR 41.38 crores the month prior. 

The benchmark index broke the immediate support level of 1407 towards the beginning of last month. It fell as low as 1252.5. The new support and resistance level now stands at 1250 and 1388 level respectively. Absence of positive trigger in the market will likely cause the index to hover around the 1300’s level in days to come.   

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 -16.33 and -22.48     respectively. In the course of the month, both macd and the signal line fell by 10.40 and 14.57 points to close at -26.73 and -37.05 respectively. Both the lines continue to hover in the negative territory, giving a 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 43.09 level. Towards the middle of the month, it fell as low as 17.91 level, signifying high selling pressure in the market. However, by the end of the month, the RSI climbed back up to close at 47.59 level. The RSI indicator shows that the index has gradually moved out of the oversold zone. 

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 hung around the lower bollinger band for majority of last month, indicating oversold condition. Nonetheless, Nepse climbed back up and moved along the middle band, signing a decrease in the selling pressure. Market volatility remained high throughout last month as the distance between the upper and lower band remained wide.

The benchmark index declined by 104.99 points (or down -6.93%) to close at 1357.57 last month. Bearish sentiment continues to loom over the market due to political uncertainty and absence of any bullish trigger. Nepse is still below the 200-day and 50-day moving average. The macd is above the signal line, giving a bullish trigger in the short run. However, both the lines continue to slide in the negative territory. The RSI shows a decrease in the selling pressure in the market. The bollinger bands show presence of high market volatility. The new support and resistance level stands at 1250 and 1388 respectively. 

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