Technical Analysis 1. Market Summary (as of Aug 22, 2014)

Nepse at close last week (Aug 21, 2014) 998.13

Nepse high last week (Aug 18, 2014) 1013.25

Weekly Change - 36.26 (or - 3.51 %)

Daily Volume (Avg.) NPR 54.43 crores

Total Traded Amount (weekly) NPR 2.18 billion

Immediate Resistance 1036.98

Immediate Support 976.01

RSI 38.96

MACD Line -0.12

Signal Line 10.59

2. Market Trend

Nepse (Jan 01, 2014 – Aug 22, 2014)

The secondary market continued its downward slide from the previous weeks as Nepse fell by 36.26 points (or - 3.51%) this week to close at 998.13 points. This is one of the biggest weekly declines witnessed so far this year. Since Nepse made a top at 1083.55 points on July 21, 2014, the market has fallen by a total of 85.42 points (or - 7.88 %). This huge drop has caused Nepse to touch the 50-day moving average, which may be seen as a concern for investors. If the index can stabilize on or above this moving average, the market may witness a turnaround in the near future. However, if it crosses below this moving average with high volume, it would indicate another bearish run. The volume situation improved slightly this week as a total of NPR 54.43 crores were traded each day on average. This is huge improvement from average volume of NPR 38.39 traded last week. The next week will be crucial in determining the future trend of Nepse.

3. 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. Along with the decline in Nepse, the RSI also ended near the oversold zone this week as it closed at 38.96 levels due to higher selling pressure. The last time the RSI reached anywhere near the oversold region was on March 18, 2014, when it closed at 30.65 levels.

RSI (Jan 01, 2013 –Aug 22, 2014)

4. 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 indicator has continuously shown a downward momentum in the market this week. The MACD line has been falling at a greater momentum when compared to the Signal line and is close to reaching the zero line.

MACD (Jan 01, 2013 – Aug 22, 2014)

5. 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 Nepse line continued its downward trend until it crossed below the lower band. This suggests that the market has been currently oversold in recent times.

Bollinger Bands (Nov 04, 2013 – Aug 22, 2014)

Overview: Nepse continued its downward trend this week as the market fell by 36.26 points (or - 3.51%) this week to close at 998.13 points. This also happened to be one of the biggest weekly declines of 2014 witnessed during a trading week. Additionally, news from the NRB regarding limiting BFIs to hold only 1% of their Tier-1 capital in shares for trading purposes caused jitters in the market. The overall volume of the market increased this week as investors traded NPR 54.43 crores each day on average. Nepse is currently trading right on the 50-day moving average. If Nepse falls below the moving average with high volume, it would indicate a bearish signal. The RSI declined to 38.96 levels as it moves closer to the oversold region. The MACD indicator also indicates high momentum in the downward direction. The Bollinger Bands indicate that the market has gradually fallen into oversold region. Overall, the indicators indicate that there has been greater downward momentum in the market in recent times. Next week, volume and 50-day moving average will be key in determining Nepse’s future direction.

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Nepse (Jan 01, 2014 – August 22, 2014)

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RSI (Jan 01, 2013 – August 22, 2014)

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