Monthly Technical Analysis of Nepse (September 26th 2018 – October 25th 2018)

Stock Taking     0

Festival Effect

Trend Analysis

NEPSE index lost 36.63 (or down 2.867%) to close at 1241.11 last month. Currently, the index is trading above the 50 days moving average. However, the index is still moving below 200 days moving average. In the course of last month, NEPSE index broke outside of the ascending triangle, breached the support level of 1224 reaching the low level of 1212.88 and bounced back to close at 1241.11. Average daily turnover decreased to Rs. 34.33 crore from Rs. 54.65 crore the month prior. The decrease in turnover can be attributed to seasonal effect of Dashain Festival. Currently 50 days moving average of NEPSE is acting as a strong support as NEPSE bounced back from 50 days moving average on several occasions during the course of last month. The 50 days moving average of NEPSE stands at around 1210 level. NEPSE took support around the 61.8% Fibonacci retracement zone of the recent upswing from 1170 to 1280, which indicates that the 61.8% Fibonacci retracement is acting as a strong support. Currently, NEPSE is trading at around 1250 and 1240, which falls around 38.2% Fibonacci retracement which indicates that 38.2% of Fibonacci retracement is the acting as a resistance.

Resistance and Support

NEPSE index was volatile in the recent month. In the course of month, the index broke the support level of 1224 and bounced back to close at 1241.11. The average traded volume turnover was lower than the previous month indicating a decreased market participation. Decreased market participation is normal in the pre and post Dashain period. The immediate support and resistance have been changed to 1210 and 1277 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 20.11 and 14.86 respectively. By the end of the month, the MACD and the signal line decreased by 16.04 and 10.80 points to close at 4.07 and 4.06 respectively. The MACD line and signal line continues to move in the positive zone without gap between signal line and MACD. MACD and signal line hovering around positive zone indicates a presence of bull 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 73.34 levels. In the course of the month, RSI lost 20.25 points to close at 53.10. Last month, RSI tested the 60 level for 3 times and bounced back to close at 53.10. Positive divergence can be seen between NEPSE index and RSI as it is moving in same direction and forming a lower high.

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 month, stood at -6.6b level. In the course of month, it lost 2.2b points to close at -8.8b. OBV and NEPSE is indicating negative divergence as NEPSE remains constant above 1240 level where as OBV continues to move in down trend.

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. At the beginning of the month NEPSE was hovering above mid Bollinger band. During the mid-month, NEPSE crossed below the mid Bollinger band and at the end of  the end of the month, NEPSE closed at the mid Bollinger band. The distance between the lower and upper Bollinger band is still wide indicating a volatility in the market.

e. Overview
NEPSE index experienced high volatility in the course of last month. NEPSE index lost 36.63 (or down 2.867%) to close at 1241.11 last month Currently, the index is trading above 50 days moving average. However, the index is still moving below 200-day moving average. In the course of last month, NEPSE index broke outside of the ascending triangle, breached the support level of 1224 reaching the low level of 1212.88 and bounced back to close at 1241.11. The MACD line and signal line continues to move in the positive zone without gap between signal line and MACD. Positive divergence can be seen between the NEPSE index and RSI as it is moving in same direction and forming a lower high. OBV and NEPSE is indicating negative divergence as NEPSE remains constant above 1240 level where as OBV continues to move at down trend. The immediate support and resistance have changed to 1210 and 1277 respectively. 

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