NEPSE is popular in the Nepalese Stock Market since the use of technology in this sector. More than 55 lakh people are involved in the stock market in Nepal and they have invested their money without Proper knowledge about it. In this article, I have explained the details of NEPSE, Types of NEPSE Analysis and provided some easy basic methods for NEPSE Technical Analysis. Additionally, I provided a link for a technical chart available to analyze NEPSE free of cost.
Meaning Of NEPSE
NEPSE stands for Nepal Stock Exchange. This is a part of the Nepalese capital market which is an example of the Nepalese secondary capital market. If so, what is the secondary market?
Based on nature, there are two types of the capital market which are as follows:
- Primary Capital Market
- Secondary Capital Market
Initial Public Offering(IOP), Further Public Offering(FPO), and Right Issue are the primary capital market. On the other hand, the transaction of listed securities issued from IPO, FPO, and Right Issues is known as Secondary Capital Market.
Note: we can apply Technical Analysis only for the Secondary capital market. In the primary capital market, instead of technical analysis, we conduct a fundamental analysis to analyze companies
What Are The Types Of Stock Analysis?
Stock analysis is a sensitive and tough task for investors. The stock analysis finds the potential price movement of stocks in the future and helps investors to take buy and sell decisions. Investors should know all types of stock analysis because the prediction of the market requires cumulative analysis.
Three main methods of stock analysis are given below:
1. Fundamental Analysis
Fundamental analysis is also known as Company Analysis. The objective of fundamental analysis is to determine company’s whether the company is overvalued or undervalued at today’s price. For that, we have to calculate the intrinsic value of the stock by discounting future returns at the required rate of return. If the intrinsic value is greater than the current market price, the stock is underpriced, and vice versa.
2. Technical Analysis
Technical analysis is all about forecasting the next price movement of a stock with the help of past price movement patterns. We do not consider the fundamental aspects of the company for technical analysis. We will discuss more it later in another section.
3. Sentimental Analysis
Sentimental analysis is related to the study of investors’ attitudes. Sentimental analysts try to figure out what investors are thinking about the current market price and what they are going to do in the future. That is why it is also called psychological analysis.
NEPSE Technical Analysis
As we have known that there are three types of stock analysis and one of them is technical analysis. In this section, I am going to explain how we can analyze stocks and other securities listed at NEPSE from a technical point of view.
IS Free Chart Available To Analyze NEPSE?
Yes. We can analyze NEPSE from a technical perspective by using free resources also. NEPSE Alpha Technical Analysis Chart is one of the most useful charts for all Nepalese investors which can be used for technical analysis with full of features free of cost.
If you want NEPSE live chart, you have to pay a certain cost. Otherwise, we have to wait for one to two hours for an updated chart for each trading day.
Disclaimer: Stock market investment is subject to market risk. Buy or sell decisions should be done with individual risk appetite and money management.
Major Indicators For NEPSE Technical Analysis
Technical Analysis has been criticized many times, but it helps a lot to earn money from stock trading in the short term. Both short-term traders and investors use this.
Investors should be concerned that indication does not mean confirmation. Technical analysts use many indicators to identify what the price action is saying about the future trends of the market. Some indicators that we can use for technical analysis of NEPSE are listed below:
1. NEPSE Technical Analysis With Candlestick Pattern
Candlestick is a price chart that shows the open price, close price, high price, and low price for a particular trading timeframe. Thousands of candlestick patterns are available for analysis which have distinct meanings.
Predicting the stock price using a single candlestick is tough; so, most technical analysts use this method to find whether there is selling pressure or buying pressure at a particular trading time frame because the candlestick clearly shows the price volatility of the stock at that trading time frame.
2. NEPSE Technical Analysis With Trend Analysis
Fluctuation of price makes candlesticks, and a series of candlesticks make a trend. An uptrend is a series of higher highs and higher lows, a downtrend is a series of lower highs and lower lows, and a sideways is the fluctuation of price within a certain price range.
An uptrend is known as a bullish market, and a downtrend is known as a bearish market. In Nepal, investors always want to see the market bullish because short selling (which can be done during a downtrend) is not available here.
When the market goes sideways, it is understood as the market accumulating energy for the next trend (Either uptrend or downtrend). At whichever trend the market continues after the sideways market, we assumed that the continued trend will be strongly continued.
3. NEPSE Technical Analysis with Support And Resistance Analysis
Those price points from where stock price had started to rise in history are called support and those price points from where stock price had started to fall in history are called resistance. Support is known as the demand zone whereas resistance is considered the supply zone.
The market always reacts with support and resistance. It always faces resistance to going up and uses support while falling. In the bull, the market breaks resistance and goes up, in the bear, the market breaks support and goes down.
The market always reacts to support and resistance. Sometimes it takes a few days to break support and resistance, sometimes after breaking support and resistance it goes for retesting the support and resistance lines. Short-term traders mostly use this technique.
4. NEPSE Technical Analysis With Relative Strength Index(RSI)
The full form of RSI is the relative strength index. This index helps us to know whether the stock is oversold or overbought. We do not need to calculate RSI ourselves because the analysis chart already has an indicators menu, we simply have to search for the indicator.
For the simple trading strategy, we consider an oversold zone if RSI is below 30 and Overbought Zone if RSI is above 70. In other words, when RSI is below 3o it indicates that selling pressure is going to end and buying momentum will be started. Similarly, when RSI is above 70 that indicates buying momentum is at the nearest saturation and selling will be started soon.
5. NEPSE Technical Analysis With Moving Average Convergence Divergence(MACD)
The full form of MACD is Moving Average Convergence and Divergence. MACD line, Signal line, and Histogram are major components of MACD Analysis. We have to analyze MACD in the daily time frame for better prediction. (Consider the Above Figure)
The blue line is the MACD line and the red line is the signal line. For a simple trading strategy, if the MACD line crosses the signal line from below, it shows a buy signal and potential uptrend. On the other hand, if the MACD line crosses the signal line from above, it is an indication of a sell signal and a potential downtrend in the future.
MACD is fruitful for mid-term trading so short-term traders or swing traders will not be benefited much from using MACD.
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FAQ
1. How price is determined in NEPSE?
The interaction between demand and supply of a particular security determines the price in NEPSE.
