TECHNICAL ANALYSIS OF NEPSE

Following the golden days of Nepse where the market index reached to the height of 1175.38 levels, came the era of bearish which lasted for more than 3 and half years where the market plunge to the lowest level of 292.32 levels. Now, by the means of technical forecasting, we analyzed and covered the phase following the correction period mentioned above and have come up with where the Nepse currently stands and what are the possible Nepse targets in future dates.

As we can see in the graph, the market index came to end its correction phase on 29th March 2012 at 298.89 levels and started to make the retracement. The confirmation of bullish market came only after  the Nepse index crossed the 180 days moving average and started to trade above it which was from the level of 319.94  dated 12th April 2012 (highlighted as mark A). After the breach over the 180 days moving average, the market came to resist at a level of 432.82 and followed with a correction of 70.19 points to the level of 361.50 (highlighted as Mark B)

Subsequently after the correction, the Nepse index gradually climbed to the level of 433.16 levels by 17th October, 2012 but soon after the market breached the 100.00% Fibonacci level, the market made a swift rally up to the level of 482.50 where it made resist at 161.00% Fibonacci level. However, after making a small correction, the market index was able to breach the level and soar up to a Fibonacci level of 261.8% i.e.  the height of 555.93 levels by 17th February 2013.

With the advancement to new heights, the market index was also making negative divergence with RSI oscillator. As the Nepse index was making higher high from 501.51 levels to 541.10 levels then to 555.93 levels, the RSI level was making a lower low from 89.22 levels to 81.62 then to 73.50 levels creating a clear negative divergence which we have highlighted in the graph with blue lines.

In the company of negative divergence and resistance at a strong 261.8 % Fibonacci level, the market came to make bearish movement up to the level of 481.93 levels; this movement came to end the negative divergence with the RSI as we can see progress of RSI and Nepse are in similar manner now.  

In the current phase, the market is making support with 180 days moving average and retesting its previous support of 482.50 levels, which is the previous breach level of 161.8% Fibonacci level, making it very much a strong support level, and looking at the RSI level also, the market currently is in oversold zone which makes the current Nepse level very much an ideal reversal zone.


Support and Resistance

Resistance Levels: 556, 609
Support Levels: 475, 435

Recommendation

Based on the chart and explanation above, we can come to a conclusion that Nepse is in reversal zone. The best strategy to invest in the current market scenario would be to wait for confirmation meaning wait for Nepse to make little higher ground then long position would be ideal. However, if the market starts to tumble below the level of 482.50, it would better to be out of the market.