Monthly Technical Analysis of Nepse (27 March to 25 April 2017)

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Improved Investor Confidence

Trend Analysis
The benchmark index continued its bullish run in the course of last month. Nepse gained 138.55 points (or up 9.08%) to close at 1672.38. Several factors supported the bullish momentum in the market. Positive political state of affairs, as well as Insurance Board’s directive to increase insurance capital, has raised investor confidence. Nepse surpassed the 200-day moving average towards the beginning of the month, further supporting the bullish run. The average volume turnover increased considerably to NPR 152.41 crores from NPR 69.08 crores the month prior. 

Resistance and Support

The benchmark index broke the immediate resistance level of 1550, as well as resistance 2 of 1630, towards the beginning of last month. Currently, the new support and resistance level stands at 1540 and 1780 respectively. The index has been hovering around late 1600’s level, and will likely enter the 1700’s level in the coming weeks.  

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 45.17 and 17.98 respectively. In the course of the month, both MACD and the signal line climbed up by 11.44 and 46.98 points to close at 56.61 and 64.96 respectively. The MACD showed bullish rise during the first half of last month. However, towards the middle of the month, the index decline by 97.78 points where the MACD crossed below the signal line.

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 82.76 level. Towards the end of the month, it decreased by 19.73 points to close at 63.03 level. RSI remained in the over-bought zone for majority of last month. 

The RSI indicator still shows presence of buying pressure in the market.

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 between the upper and middle Bollinger band in the course of last month. This still indicates buying pressure in the market. The distance between the upper and lower bands has converged, signifying a decrease in market volatility.

The benchmark index gained 138.55 points (or up 9.08%) to close at 1672.38 last month. Positive political scenario and Insurance board’s directive for capital increment has caused the market to go on a bullish run. The index has surpassed the 200-day moving average, indicating presence of bullish momentum. The MACD line is moving below the signal line, which shows a short term bearish signal. The RSI is hovering at 63.03 level, indicating a slowdown in buying pressure in the market. The Bollinger bands indicate a significant decrease in the market volatility. The new support and resistance level stands at 1540 and 1780 respectively. 

Disclaimer: This report has been prepared by Kriti Capital & Investments Ltd. on the basis of publicly available information and internal analysis of the market. The information contained herein does not purport to be comprehensive and is strictly for information purposes only.

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