Technical Analysis 1. Market Summary (as of Aug 01, 2014)

Nepse at close last week (July 31, 2014) 1066.09

Nepse high last week (July 27, 2014) 1073.93

Weekly Change -13.00 (or -1.20%)

Daily Volume (Avg.) NPR 51.06 crores

Total Traded Amount (weekly) NPR 2.04 billion

Immediate Resistance 1083.55

Immediate Support 1025.69

RSI 72.54

MACD Line 34.60

Signal Line 37.91

2. Market Trend

After 9 continuous weeks of positive gains in the market, Nepse moved in the opposite direction this past week. The secondary market declined by 13.00 points (or -1.20%) to close at 1066.09 points. The daily average volume also witnessed a huge decline as the average daily volume for this week fell to NPR 51.06 crores from NPR 89.72 crores last week, a decrease of NPR 38.66 crores each day on average. The daily average trading in the previous to last week was NPR 66.46 Crores. Numerous brokers were not able to trade this week on three different days which is partly responsible for the reduced turnover in the market. The excitement witnessed in the market over the past few weeks subsided this week as Nepse could not carry ahead the momentum from previous weeks. The current resistance and support levels stand at 1083.55 and 1025.69 respectively.

Nepse (Jan 01, 2014 – July 31, 2014)

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. Following the market trend, the RSI indicator also witnessed a big decline as it closed at 72.54 levels by the end of trading week, which is 11.12 points lower when compared to the previous week. However, the RSI has been able to maintain just above the overbought levels.

RSI (Jan 01, 2013 – July 31, 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. On Monday, the MACD line crossed below the signal line triggering a sell signal in the market. This indicates that the near term moving average (MACD line) has been on a declining trend when compared to the longer term moving average (Signal line). At present, the MACD and Signal lines are maintaining at 34.60 and 37.91 points respectively.

MACD (Jan 01, 2013 – July 31, 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. Since the Nepse line moved away from the upper band last week, it has continued on a lower trend. As a result, Nepse is inching closer towards the mid-band suggesting that the market is gradually moving towards neutral levels from the overbought zone.

Bollinger Bands (Nov 04, 2013 – July 31, 2014)

Overview: After reaching multiple new highs during the last several weeks, Nepse consolidated during the past trading week. With momentum on the lower side, Nepse declined by 13.00 points (or 1.20%) and closed at 1066.09 points. The average daily turnover remained at NPR 51.06 crores this week, which is a significant drop from NPR 89.72 crores from the previous week. The next resistance and support levels stand at 1083.55 and 1025.69 respectively. The RSI declined by 11.12 points to maintain at 72.54 levels, however, it is still maintaining slightly above the overbought line. The MACD line crossed below the Signal line this week suggesting a sell signal in the market. The Bollinger Bands indicate that the market is gradually moving away from the overbought zone as it moves closer to the mid-band. Most indicators represent an overbought market in recent times; however, we may see low volatility and sideways movement in the near future considering Shrawan as the month of fourth quarter financial reporting by listed companies.

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Nepse (Jan 01, 2014 – July 31, 2014)

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RSI (Jan 01, 2013 – July 31, 2014)

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Bollinger Bands (Jan 01, 2013 – July 31, 2014)

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