Market Trend

Nepal Stock Exchange Index (Nepse) had made a huge gain during March 21to April 20, 2014 period. During this period Nepse jumped by 35.97 points (4.45 percent) continuing the momentum into the current period. On May 5, 2014, Nepse witnessed an increased buying pressure as it crossed above the strong resistance level of 831.86 points with high volume. This was a significant breakthrough for the market and it helped to push Nepse to new heights. The stock market index finally peaked at 866.25 points on May 07, 2014 but could not sustain the momentum. Citing overbought conditions, the market began consolidating as investors sought to book profit from the recent uptrend. However, Nepse is still above its 50-days moving average as well as the immediate support level of 831.86 points.  

 

RSI

Relative Strength Indicator is one of the leading indicators of technical analysis 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 indicator gradually decreased from its peak at 79.98 levels (overbought zone) on May 7, 2014 until it settled at 56.94 levels (neutral zone) on May 21, 2014. As the buying momentum and market volume could not sustain at the peak the RSI retraced back to the neutral zone. This is considered as a small correction in the domestic stock market. 

 

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. 

 

During the review period, the MACD indicator followed a similar trend to that of RSI indicator. The MACD line and the Signal line began rising and reached 15.25 and 10.62 points respectively. However, there was a slight change in momentum as the MACD line and Signal line ended at 11.87 and 12.95 points respectively. On May 19, 2014, the MACD line crossed below the Signal line suggesting a near term downward trend. However, the long-term momentum still remains positive. 

 

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 (lower band). The bands are an indication of volatility, which are derived by calculating standard deviation.

 

During the first week of the review period, Nepse crossed above the upper band suggesting an overbought scenario. Since then, it began retracing slightly lower and is currently maintaining within the neutral zone. The diverging bands indicate that the market may be less volatile in the near term. 

 

 

Overview

Nepse continued its momentum from the previous four weeks as the market made substantial gain of 35.97 points (4.45%). Nepse crossed its immediate resistance level of 831.86 points, which has remained an important technical barrier for the long-term bull trend. The market is also well above the 50-day moving average which represents a continuation of the long-term bull trend. As of the last trading day, the RSI closed at 59.40 levels maintaining within the neutral zone. The MACD indicator shows the MACD line slightly crossed below the Signal line. This indicates that the market may see a short decline in the near term. The Bollinger Bands also represent a fairly stable market with less volatility in the coming days. Overall, the long-term market scenario remains bullish with the possibility of a small decline in the near term.