Monthly Technical Analysis of Nepse (October 26, 2018 – November 22, 2018)

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Decline Continues
 
Trend Analysis
 
 
NEPSE index lost 59.70 (or down 4.81%) to close at 1181.41 last month. Currently, the index is trading below the 50 days moving average and 200 days moving average. NEPSE breached the support level of 50 days moving average. During the course of last month, NEPSE index broke outside of the head and shoulder pattern, breached the support level of 1210 and closed at 1181.41. NEPSE is trading in downtrend moving inside the descending wedge. The target of NEPSE after the breakout of the head and shoulder pattern is around 1150. The average daily turnover has decreased to RS.22.78 from Rs. 34.33. Last month, online system was introduced in the NEPSE. However, the online system couldn’t increase the volume in the market.
 
Resistance and Support
 
 
NEPSE index showed bearish momentum in the recent month. In the course of month, the index broke the support level of 1210, bounced back to 1222.53 and reached the low level of 1181.41. The average traded volume turnover was lower than the previous month indicating a decreased market participation. The immediate support and resistance have change to 1150 and 1210 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 4.07and 4.06respectively.By the end of the month, the MACD and the signal linedecreasedby 16.2724 and 13.003 points to close at -12.20 and -8.94 respectively. The MACD line and signal line has entered in the negative zone indicating a bearish momentum 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 at53.10levels. In the course of the month, RSI lost 19.0545 points to close at 34.04. RSI is in decreasing trend forming a lower low and low high. 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 -8.8 b level. In the course of month, it lost1.5 b points to close at -10.3 b.Last month, OBV has decreased by 1.5b indicating a negative sign in the 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. 
 
At the beginning of the month, NEPSE index has moved from the mid Bollinger to the lower Bollinger band. During the course of month, the NEPSE index has moved in between mid-Bollinger band and lower Bollinger band indicating a bearish sentiment in the market. At the end of month, the distance between the lower Bollinger band and upper Bollinger band has widen indicating a volatility in the market.
 
 
e. Overview
NEPSE index lost 59.70 (or down 4.81%) to close at 1181.41 last month. Currently, the index is trading below the 50 days moving average and 200 days moving average. During the course of last month, NEPSE index broke outside of the head and shoulder pattern, breached the support level of 1210 and closed at 1181.41. NEPSE is trading in downtrend moving inside the descending wedge. The MACD line and signal line has entered in the negative zone indicating a bearish momentum in the market. Positive divergence can be seen between NEPSE index and RSI as it is moving in same direction and forming a lower high. Last month, OBV has decreased by 1.5b indicating a negative sign in the market. The NEPSE index has moved in between mid-Bollinger band and lower Bollinger band signifying a bearish sentiment in the market. At the end of month, the distance between the lower Bollinger band and upper Bollinger band has widen indicating a volatility in the market. The immediate support and resistance have change to 1150 and 1210 respectively. 

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