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November 2016 Stock Taking

Published on: 2016-11-20 11:50:38     668 times read    0  Comments

Positive in the Long-Term

Trend Analysis
The benchmark index climbed up during the first half of last month. However, it took a U-turn during the second half of the month, indicating a bearish presence in the market. The index lost 7.2 points (or down 0.34%) last month to close at 1759.71. The index is hovering just below the 50-day moving average, signifying that the short term market trend remains bearish. However, Nepse is moving well above the 200-day moving average, indicating the long term market outlook to be positive. The average volume turnover decreased significantly to NPR 81.70 crores compared to NPR 146.30 crores the month prior.     

Resistance and Support

The benchmark index continued to hover around 1700 level last month. Nepse fell as low as 1730 at the beginning of the month. In the course of the month, it climbed as high as 1819.88 level, which was followed by a down turn for the rest of the month. The index is below the 50-day moving average, indicating a loss of investor confidence in the market in the short run. The new support and resistance level now stands at 1730 and 1880 respectively.  

 

Nepse Trend Indicator
a. MACD
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 3.44 and 12.39 respectively. The macd remained in the negative territory for the first half of the month. But, it climbed above the signal line towards the middle of the month, showing a rise in market confidence. However, by the end of the month, the macd and the signal line ended at -3.90 and 0.67 respectively. The macd indicator shows presence of bearish sentiment in the market.

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 38.14 level. In the course of the month, it gained 5.78 points to close at 43.93 level. The RSI moved closer towards the oversold territory in the course of last month. However, it continues to hover around late 40’s and early 50’s territory, indicating a neutral stance.

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 around the middle bollinger band for most of last month. Nevertheless, the Index declined and moved closer towards the lower band by the end of the month, indicating possible oversold condition in the market. The upper and lower bands have converged, signifying a decrease in market volatility.

Overview
The benchmark index declined by7.2 points (or down 0.34%) to close at 1759.71 last month. Akin to the preceding month, Nepse followed a bull run for the first half of last month, after which was followed by a bearish shift. The index is hovering below the 50-day moving average, indicating short term bearish presence. However, the index is moving well above the 200-day MA, signifying long term positive outlook of the market. The MACD line gives a bearish signal as the macd line is in the negative territory, as well as moving below the signal line. The RSI is hovering around the 40’s zone, giving a neutral stance. The bollinger bands indicate a decrease in market volatility as the upper and lower bands have converged. The new support and resistance level now stands at 1730 and 1880 level respectively. 


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