Technically, where is the stock market heading from here?

The only secondary market of Nepal breached the 1000-points mark for the first time after a hiatus of six long years on Tuesday (8th July, 2014).

Now, many of us are curious where would the stock market head from here. So, to enlighten the stakeholders in this matter, the Sharesansar team, with the help of technical analysis, has tried to highlight some of the likely scenarios as well as key resistance level to watch for.
 
Technically, the benchmark index came to end its bearish phase from 1175 level, on 29th March 2012 at 298.89 level. The confirmation of bullish market came only after the Nepse index crossed the 180 days moving average and started to trade above the level of 319.94 on April 12, 2012.

Following this, the benchmark index made leaps and bounces of nearly 700 points within two years. Of the mentioned gain, half of it was observed in the last seven months of this fiscal year alone.

Now, looking at the current trend where Nepse has gained nearly 100 points within the last few days backed by the daily average turnover of more than Rs 600 million, the probability of continuation of Bull Run is very high.

However, it is to be noted that there are several resistance levels where caution is required. The first resistance level is 1050 and the second is 1175, which is the highest level of the benchmark index till date. The investors with short term investment can opt to book their profit on these levels.

Among the two, 1175 level is a much stronger resistance as it is psychological level for the market also. For any index to break its previous high, the likely scenario is that the index will make correction before breaching it. So, the probability of correction near 1175 level is very much on the card for Nepse, which makes it ideal position for investors with short term motive to book their profit around this level.

As for the prospect of long term investment, if the Nepse index breaches the 1175 level then its next strong resistance will be near 1750 level, where the market’s bull phase is likely to fade and correction phase is likely to start or it can be labeled as reversal zone for Nepse. So, investors with long term intention can opt to wait up to this level before making an exit strategy.

Disclaimer: We have written this article based on the technical aspect -- mainly based on Market line chart, Fibonacci tool, RIS oscillator and Turnover oscillator -- of the market. We cannot be held accountable for any decision made on the basis of this article.