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January 2018 Stock Taking

Published on: 2018-01-11 11:10:30     342 times read    0  Comments

Selling Pressure

Trend Analysis
The benchmark index fell by 21.14 points (or down 1.38%) to close at 1472.15 last month. The index has moved below the 50-day, as well as 200-day moving average, giving a bearish signal. Completion of the election at the beginning of the month did little to create bullish sentiment in the market. Increase in the interbank and t-bill interest rates further supports the bearish sentiment. The average volume turnover increased to NPR 60.69 crores from NPR 48.45 crores the month prior.   

Resistance and Support

The Nepse index reached as high as 1537.67 towards the first half of last month. The index did not test the resistance level of 1546, giving no bullish indication. The current support and resistance level stands the same at 1420 and 1546 respectively. With no bullish trigger, Nepse could test the immediate support level in the coming weeks.     

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 last month, stood at 11.89 and 15.19 respectively. In the course of the month, both the MACD and the signal line increased by 6.06 and 14.07 points to close at -5.83 and -1.12 respectively. The first half of the month showed bullish momentum as the MACD hovered above the signal line. However, by the end of the month, the MACD line crossed below the signal line, triggering a bearish movement. Both the line declining in the negative territory gives a bearish indication.

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 52.98 level. In the course of the month, it lost 18.31 points to close at 34.67 level. The RSI declining towards the 30’s zone indicate an increase in the selling 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 close to the upper Bollinger band towards the beginning of last month. However, by the end of the month, the index fell and reached the lower band, indicating selling pressure in the market. The distance between the upper and lower bands remains constant, signifying moderate market volatility.

Overview
The benchmark index declined by 21.14 points (or down 1.38%) to close at 1472.15 last month. The index is hovering below the 50 and 200-day moving average, giving a bearish signal. The MACD indicator has moved below the signal line, and both the lines are hovering in the negative territory. Such indication gives bearish sentiment of the market. The RSI closed at 34.67 level, signifying a rise in the selling pressure. The Bollinger bands also show selling pressure as the index moves close to the lower band. The new support and resistance level stands at 1420 and 1546 respectively. 


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