Monthly Technical Analysis of Nepse (July 22nd 2018 - August 23rd 2018)

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Downtrend Continues, Volatility Lower

Trend Analysis
Nepse index lost 3.16 points (or down0.27%) to close at 1178.5 last month. The index continues to trade below50-day moving average and 200-day moving average indicating bearish momentum in the market. The average volume turnover decreased to Rs 22.51crores from Rs 29.66 crores the month prior.

The index is moving at a downtrend channel. The formation of evening star indicates a possible continuation of downtrend in coming days.

Resistance and Support

Nepse index has shown sideways momentum in recent months. In the course of last month, the index has decreased to 1163.94 testing the immediate resistance level and bounced back to 1210.32. However, the index could not sustain it bullish momentum and declined back to 1178.5. The Nepse index has shown some bearish momentum at the end of the month. The immediate support and resistance stand at 1163 and 1224 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 last month, stood at –14.03and -16.14respectively.By the end of the month, the MACD and the signal line increased by 9.20 and 10.72 points to close at –4.83 and -5.43 respectively. The MACD line and signal line are moving in negative territory indicating a bearish sentiment in the market. Similarly, the distance between MACD and signal line is getting close indicating a possible bearish crossover in coming days.

b. RSI
RRSI 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 at35.89levels. In the course of the month, it gained 6.23points to close at 42.13levels. During course of month, the RSI has tested the level of 30 and moved towards 60’s zone. At the end of month, the RSI has bounced back from the 60’s zone indicating a rise of selling pressure.

c. (OBV)
On balance volume is a momentum indicator that uses volume flow to predict changes in stock prices. It measures buying and selling pressure as a cumulative indicator that adds volume in up days and subtracts volume on down days. On balance volume at the beginning of last week, stood at -8.6 b level. In the course of week, it lost -1.2b points to close at -9.8 b. The on-balance volume is moving in negative zone indicating a presence of selling pressure in market. 

d. 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 has hovered around mid-Bollinger band at the start of month. However, at the end of month, the index moved toward upper Bollinger band and bounced back towards lower Bollinger band. The narrow distance between the upper and lower Bollinger band indicates a low volatility in the market.

Overview
The benchmark index decreased by-3.16 points (or down 0.27%) to close at 1178.5 last month. The index continues to trade below 50-day moving average and 200-day moving average indicating bearish momentum in the market. The distance between MACD and signal line is getting close indicating a possible bearish crossover in coming days. Similarly, the RSI has bounced back from 60’s zone signifying a rise of selling pressure in the market.  The on-balance volume is moving in negative zone indicating a presence of selling pressure in market. The narrow distance between the upper and lower Bollinger band indicates a low volatility in the market. 

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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