 

News Letters

Do we currently reside in the

Accumulation Phase?
 Nov 21st 22

Newsletter DISCLAIMER: The

publication does not provide regulated
financial advice. It does not suggest a
good time to buy or sell any particular
investment. It does not predict the future.
Rather than advice, Sastoshare
Newsletter provides a range of tools and
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Info: Newsletter is prepared on Friday-

Saturday and delivered on Sunday.

Inside:

Nepse Bull Bear Strength

Summary
Model Portfolios
Market Fundamentals Summary
Quantitative Supply and Demand
Indications
Market Breadth Status
Economy
T+3 Stock-wise Trading Setups
Nepse Technical Analysis
Sector-wise Technical analysis

Nepse Bull-Bear
Strength Summary
Market Summary Dashboard

We assign percentage ranks to individual

analysis areas and find average ranks to
estimate the overall bullish and bearish
view of the market. These rankings are
based on technical aspects, short-term
trading aspects, market sentiments,
supply and demand characteristics, the
fundamental strength of individual
stocks, and the overall health of the
economy. The market's bullish rank is
high if the average value of all the
indicators is high, and the market's
bearish rank is low if the average is low.

At the close of the week, 17th November

2022, the NEPSE index was trading at a
level of 1936.83, up 2.28% from the
previous week, with a turnover of
around 5.3 billion (less than previous
traded week). According to the Market
Summary Dashboard, the market has a
51% bullish ranking and a 50% bearish
ranking.

Bullish Indicators of the week: Overall

market bullish ranking has increased by
a small margin this week due to
availability of lots of short term
Momentum and support and resistance
type setups. The short-term Index
momentum is also favorable in the
oversold zone with plenty of upside
room in the current market scenario.
The supply and demand volume says
that market may be in transition phase.

This week total deposit mobilization of

Bank and Financial Institution has
reached to the all-time high level with
Rs.5,184 billion on Wednesday. Deposit
to GDP ratio has increased to 106.85%
from 106.32% of last week. Increase in
deposits have let BFIs to decline the use
of monetary instruments like overnight
repo, SLF & other instruments which
indicates the loanable fund in the
banking system is increasing. Similarly,
Macroeconomic variables seems to be a
comfortable situation as compared to
previous month. In the first three month
of current fiscal year, Rs.281.05 billion
Remittance inflows, declining imports
and Rs.40.43 billion loans by Nepal
government & other domestic
institutions have let balance of payment
to be in surplus with Rs.12.43 billion.
Positive BOP has helped foreign
exchange reserve to increase to
Rs.1,246.22 billion which is su!icient to
cover the prospective merchandise and
services imports of 8.3 months.
However, declining exports, post
restriction on imports, lack of FDI and
repayment of foreign loan can create
negative e!ect on BOP and Foreign
Exchange reserve.

Bearish Indicators of the week: There

is weak market breadth. Even though
certain signs are showing improvement,
the economy is still sluggish.
Technically, there is poor long-term
momentum in the market, and it is at a
critical support zone. Still some sectors
are in speculative value.

Neutral Indicators of the week: Even

though the long-term Market Breadth is
weak, in regards to the percentage of
stocks above 50 SMA and number of new
lows, the indicators are showing bullish
moves, such condition provides low risk
opportunities for seasonal traders and
entry for long term investors. We cannot
be overly optimistic when long term
breadths are negative.

Model Portfolios
Alpha 30 Model Portfolio and Model
Sector Rotation Performance

Still we are in 70% Cash in both the

Alpha 30 and Sector Rotation portfolios.
We have a rule for selecting stocks and
rebalancing on the first of each month.
Accordingly, we have sold some of our
previous holdings and replaced them
with new ones in previous week. Our
new added list was as follows: GUFL,
CFCL, TRH, GILB, EDBL, SHINE, MFIL,
PICL, NTC, KRBL AND BPCL in Alpha 30
Portfolio. In Sector Rotation, we have
included leading stocks from
Microfinance, Finance and
Manufacturing and Processing Sector
(Complete list of stocks is found in Alpha
30 Menu and Sector Rotation Menu).

Till the end of November, we are not

going to change any stock. The cash
allocation remains same if the market
does not make any significant upside
move. Cash allocation will be monitored
every week on Friday and necessary
changes will be done in next trading day
in both model portfolios.

1 Week lookback

Compared to the larger market index,

we performed incredibly well in terms of
volatility and but the total return is
achieved less due to the fact that our
portfolio return is current cash balance
plus the market value of the securities.
In general, all sector turned green. In
longer term, we are beating all sector
and index by huge margin. Patience and
action with discipline is the key for
higher profit. If we like to trade
individual positions, we can even take
stocks from this model portfolio and
trade for short term swings, support
resistance and momentum setups.
Profitability in Alpha 30 stocks have
higher as per our research.

We are focusing on High Cap Stocks and

Mid Cap Stocks in this month's
(November) rebalancing. We primarily
focused on Banking, Development
Banks, finance and Microfinance. We
have replaced more than 30% stocks
from previous holding in Alpha 30
Portfolio and very few stocks in sector
rotation portfolios.

Performance from last week

Current Sector and Factor Weights

Fundamental summary
Value and Growth Perspective

Investors frequently make the

assumption that a stock's price is at fair
market value when it is close to the
Graham or Peter Lynch numbers.
Additionally, it is common to view the
market as undervalued when the index
PE ratio is below 20, overpriced when it
is above 30, and moderately valued
when it is between 20 and 30. However,
the aforementioned indicators do not
take growth into account. The
Discounted Earning Method Calculation
relies on growth as a fundamental
component to determine the likely fair
value of any security. So, we have added
this indicator as well.

Since the majority of investors pay

attention to these indications, we can
infer that their allure draws investors
with a fundamental outlook into the
market, which ultimately aids in
boosting demand. The bullish rating is
greater if these indicators are more
appealing.

The guide that we have used to give a

Bullish rating for Fundamental Summary
is given Below.

Market is in Positive territory from

Fundamental Valuation Perspective.
Fundamentally the Score is less than last
week due to changes in valuation from
the rise of market.

The top 20 stocks based on Discounted

Earning, Graham Number, and Peter
Lynch number are listed below.

(-ve means undervalued by that

percentage from fair value)

Quantitative Supply
and Demand
Market Pulse Indicator (Suitable for
short term traders)

This is a proprietary Quantitative

indicator of Nepsealpha.com. This
indicator tries to measure the supply
and demand in micro level, i.e., it
measures the supply or Demand
magnitude in Percentage basis (from
0%-100%) using intraday stock charts of
the securities which are actively traded
in NEPSE (using Purely volume and price
data from Nepsealpha Database). If all
the intraday charts are showing 100%
demand as per our analysis, it is marked
100%, if not the percentage goes down
till 0% as per total count. Same applies
for bearish Stocks.

Rules

- If 10 days average of bullish count

(which we count in daily basis)
represented by Green line is above black
line (10 days average of bearish count ),
average market pulse is Bullish and Vice
versa.

- The green line spikes represent that the

bulls have entered the market. The black
line spikes represent that the bears have
exited the market.

- If both lines are below 25%, the market

is in neutral state and market may be
waiting new move in any direction.

- Short term Bull Trap: If the Green line is

below black line but the green line
spikes up

- Short term Bear Trap: If the Green line

is above black line but the black line
spikes up

As per the chart above we can see that

current short-term trend whipsawed.
Such action suggests that the market
may go sideways. Both bullish and
bearish crossovers for last 2 weeks do
not have enough strength in their
direction.

Demand Supply Character Indicator

(Suitable for Swing Traders)

This is also a proprietary Quantitative

Indicator of Nepsealpha.com. This
indicator tries to measure supply and
demand turnover. Purely technical
analysis Price and Volume study with the
help of statistics are used to identify
supply and Demand Turnover from daily
technical charts of all the stocks which
are traded in the Nepal stock exchange.
The Green bars show the magnitude of
Bullish Turnover from 0-100% according
to our analysis and the Black bars try to
show the Supply in 0-100%.

Rules

-Exit during Spikes of Supply (with

proper money management and trade
management)

-Enter during Spikes of Demand (with

proper money management and trade
management)

-Exception (During trend transition)

Current Supply and Demand is similar to

2018 August and 2019 December where
both supply and demand are in balance.
We can see spikes in both bears and
bulls activities. This normally happens in
transition period. Such pattern tell us
that we are near the bottom of the bear
or accumulation may have started. Last
week, we saw sideways market due to
first supply volume since July. But this
week bulls have taken control which is
obvious in price trends and volume. So
what is a takeaway from this scenario?
We can be short term bull biased and
sideways biased equally but not much
bearish.

Market Breadth
Indications
Market Breadth indicators are used to
assess the condition of a group of
stocks, typically by gauging the degree
to which the group is following a
particular trend. The group can consist
of the constituents of a sector, a
particular industry, or even the entire
market. We have illustrated below the
indicators based on all the stocks that
are actively traded in the Nepal stock
market.

New High Low Index

It is a breadth indicator found by

subtracting new lows from new highs.
This indicator provides an immediate
score for internal strength or weakness
in the market. If there are more new
highs, it shows bullish strength, if there
are more new lows, it shows bearish
strength prevailing in the market.
Currently, the value is below zero as
previous week, it means there are more
new lows. This means the bearish
strength is dominating the market
according to this indicator. The number
is low compared to number at same
level during June, which suggest bullish
divergence of the indicator, which
means bearish momentum is less. We
had said last week that, once this index
moves above Zero level, we can be more
sure about beginning of accumulation
stage which we are expecting in near
future to begin. According to this
indicator, we can say that accumulation
has started. (Disclaimer: Do not base
decision based on single indicator)
 New highs and new lows o"en lag the
underlying index at major turning
points.

Stocks Above daily 50 SMA

As a breadth indicator, the proportion of

stocks trading above a 50-day moving
average assesses the internal strength or
weakness of the underlying index in the
intermediate time frame. A bullish bias is
present when the indicator is above
50%. This means more than half the
stocks in the NEPSE are above a 50-day
moving average. Recently the value
shows that it is near 40% which is a big
improvement a"er long time. It means
market is moving upward and if any
trader or investor is expecting from their
own analysis that market will head
upwards, this could be the low risk and
high reward entry. Seasonal traders
must have entered already.

Stocks Above daily 200 SMA

As a breadth indicator, the proportion of

stocks trading above a 200-day moving
average assesses the internal strength or
weakness of the underlying index in
longer time frame. A bullish bias is
present when the indicator is above
50%. This means more than half the
stocks in the NEPSE are above a 200-day
moving average. Recently the value
shows that it is near zero (as last week).
It means the index is weak.

In such scenario majority stocks are

highly undervalued. Longer term
Fundamental based traders/investors
look for opportunities to enter the
market in undervalued securities.

Economy
Monetary Situation

In the review week Deposits at Banks

and Financial Institutions (BFIs) has
increased by Rs.19 billion (0.37%) to
Rs.5,184 billion compared to rise of
Rs.12 billion in the previous week. Total
deposits held on 16th November 2022 is
the highest recorded in the Nepalese
Banking history. Majority share of total
deposits is held by commercial banks
with 87.98% stake and the remaining is
followed by other Bank and Financial
Institutions. As on mid-October 2022,
the share of current and saving deposit
in total deposits stands at 7.78% and
26.32% respectively which have resulted
Current Account Saving Account ratio
(CASA) to increase to 34.10% from
34.04% of previous month. Similarly,
Deposit to Gross Domestic Product
(GDP) ratio has increased to 106.85%
from 106.32% of last week.

Deposit mobilization which was Rs.4,758

billion last week has remained stable
this week. In the previous week lending
increased by Rs.3 billion. As on mid-
October 2022, outstanding loan of BFIs
to industrial production sector increased
5.6%, service industry sector 3.9%,
transportation, communication and
public sector 2.8%, wholesale & retail
sector 2.2%, construction sector 1.7%
and agriculture sector 0.8%. In the
review period, term loan extended by
BFIs increased 4.2%, overdra" 4.8%,
trust receipt (import) loan 2.8%,
demand and working capital loan 3.0%,
real estate loan (including residential
personal home loan) 2.7% whereas hire
purchase loan and margin nature loan
decreased by 1.5% and 5.2%
respectively.

In the review week Nepal Rastra Bank

(NRB) injected Rs.64.70 billion liquidity
using various monetary instruments as
compared to Rs.135.51 billion previous
week. This week Rs.4.67 billion liquidity
was injected through overnight repo and
Rs.60.03 billion through standing
liquidity facility (SLF). The annual
interest rate of overnight repo and SLF
are 7% and 8.5% respectively. Increase
in Deposits has resulted decline the use
of monetary instruments in the review
week.

The main objective of the monetary

operation is to implement plans set by
the monetary policy whose main
purpose is to maintain liquidity in the
banking system. During the time of
liquidity crunch or lack of liquidity, the
interest rate will increase, there will be a
lack of su!icient funds for investment,
when the loan interest rate is high, the
cost of production will increase, it will
increase inflation and investment will be
discouraged. On the other hand, when
there is more liquidity in the market,
interest rates fall to low levels, this does
not encourage savings, consumption
increases, when demand increases,
inflation may increase, due to low
interest rates, credit may flow to poor
projects, and capital flight may occur.
Keeping this in mind, liquidity is
managed through open market
operation in line with the
implementation of monetary policy.
Nepal Rastra Bank use monetary
instruments like Repo, Reverse Repo,
Outright Sale, Outright Purchase,
Deposit Collection and NRB Bond to
maintain liquidity in the banking system.

Similarly, Credit to Deposit ratio (CD

Ratio) which is one of the important
regulatory ratios set by the central bank
has decreased to 86.85% from 87.13% of
last week. BFIs are required to maintain
CD ratio below 90%. The state of
liquidity in the banking system
determines the level of interest rates.
The weighted average 91-day treasury
bills rate remained at 11.01% this week.
In the third month of FY 2022/23
(2079/80), the weighted average 91-day
treasury bills rate remained at 10.14%
which was 4.86% in the corresponding
month a year ago. The average inter-
bank rate of BFIs which is considered as
operating target of monetary policy,
stood 8.50% in the review week. Such
rate was 8.49% a week ago. High inter-
bank interest rate, treasury bills rate and
use of monetary instruments indicates
the uncomfortable situation of liquidity
management in the banking system
which is reflected in deposits and
lending interest rates of bank and
financial institutions.

The average base rate of commercial

banks increased to 10.34% in the third
month of FY 2022/23 from 7.57% a year
ago. As on mid-October 2022, wt.
average interest rate on deposit has
increased to 8.16% from 7.81% of
previous month. Similarly, wt. average
interest rate on credit has also increased
to 12.19% from 12.06% of previous
month. Current interest rate on deposit
is the highest reviewing from FY 2016/17.
During the period interest rate has
touched the bottom of 3.27% in Mid-
September 2016. In the same period
interest rate on loan has reached the
height of 12.48% in Mid-August, 2018
and fell to 8.43% in in Mid-July, 2021.
Similarly, Bank & financial institutions
have published new interest rates to be
e!ective for the month of Mangsir (mid-
November). Commercial Banks have
announced the interest rate to be
constant for the month of Mangsir. As on
Kartik Interest rate on term deposit was
12.13% for individuals and 10.13% for
institutions.

Fiscal Situation

According to the data of Financial

Comptroller General O!ice (FCGO),
Ministry of Finance, revenue
mobilization of the federal government
decreased by Rs.20.12 billion (13.86%)
compared to Rs.23.36 billion (121.24%)
increment of previous week. As on 17th
November government has collected
Rs.298.27 billion revenue which is
20.45% of the total target for current
fiscal year. Out of which 83.30% of the
receipt is from tax revenue, while the
rest is from non-tax revenue, grants and
other income.

For the implementation of policies and

programmes of fiscal year 2079/80
(2022/23) Ministry of Finance has
allocated Rs.1,793.83 billion. Of the total
allocation of budget, Rs.753.40 billion
(42%) is for current expenditure,
Rs.380.38 billion (21.2%) for capital
expenditure, Rs.230.22 billion (12.85%)
for financing and Rs.429.83 billion (24%)
for fiscal transfers to provinces and local
levels. As on 17th November
government has spent Rs.354.34 billion
which is 19.75% of the total budget.
Expenditure has decreased by 5.71%
compared to increase of 136.32% of
previous week. Out of total expenditure,
majority portion has disbursed for
recurrent expenditure which is Rs.284.43
billion (80.30%) followed by financing
and capital expenditure with Rs.43.30
billion (18.81%) and Rs.26.50 billion
(6.97%) respectively.

External Sector

- Balance of Trade

During the three months of 2022/23,

merchandise exports decreased 35.70%
to Rs.41.82 billion against an increase of
109.5% in the same period of the
previous year. Exports of zinc sheet,
particle board, woolen carpets,
readymade garments, tea, among
others, increased whereas exports of
soyabean oil, palm oil, oil cakes, jute
goods, silverware and jewelries, among
others, decreased in the review period.
Similarly, merchandise imports
decreased 16.2% to Rs.401 billion
against an increase of 63.7% a year ago.
Imports of petroleum products,
chemical fertilizer, sponge iron,
medicine, coal, among others, increased
whereas imports of transport equipment
& parts, silver, telecommunication
equipment and parts, crude soyabean
oil, M.S. wire rod, bars, coils & others,
among others, decreased in the review
period.

Total trade deficit decreased 13.1% to

Rs.359.18 billion during the three
months of 2022/23. Such a deficit had
increased 58.3% in the corresponding
period of the previous year. The export-
import ratio decreased to 10.4% in the
review period from 13.6% in the
corresponding period of the previous
year.

- Remittance

Remittance inflows increased 16.8% to

Rs.281.05 billion in the review period
against a decrease of 7.1% in the same
period of the previous year. In the US
Dollar terms, remittance inflows
increased 7.9% to Rs.2.19 billion in the
review period against a decrease of 7.1%
in the same period of the previous year.
Remittance inflow has decreased by
small margin in the review month as
compare to the previous month.
However, remittance in the month of
Ashwin which is Rs.94.46 billion is above
the average remittance of last 12
months.

Number of Nepali workers taking new

approval (institutional and individual)
for foreign employment increased
123.1% to 147,932 in the review period.
Likewise, the number of Nepali workers
taking renew entry approval for foreign
employment increased 66.2% to 57,861
in the review period. It had increased
219.7% in the same period of the
previous year.

- Current Account and Balance of

Payments

The current account remained at a

deficit of Rs.34.28 billion in the review
period compared to a

deficit of Rs.149.81 billion in the same

period of the previous year. In the US
Dollar terms, the current account
registered a deficit of Rs.269.5 million in
the review period compared to deficit
of1.26 billion in the same period last
year. Likewise, capital transfer increased
34.8% to Rs.2.59 billion and net foreign
direct investment (FDI) remained Rs.79.6
million. In the same period of the
previous year, capital transfer and net
FDI amounted to Rs.1.92 billion and
Rs.5.07 billion respectively.

As per the report published by Nepal

Rastra Bank, in the third month of the FY
Balance of Payments (BOP) remained at
a surplus of Rs.12.43 billion in the review
period compared to a deficit of Rs.87.71
billion in the same period of the
previous year. In the US Dollar terms, the
BOP remained at a surplus of 91.8
million in the review period compared to
a deficit of 741.2 million in the same
period of the previous year. Increase in
remittance, decline in imports and
Rs.40.43 billion loans by Nepal
government & other domestic
institutions have let balance of payment
to be in surplus of Rs.12.43 billion. BOP
was in deficit for last 15 months.

Balance of Payment is an important

indicator to evaluate the economic
situation of the country. It represents
the external sector i.e transactions made
between entities in one country and the
rest of the world over a defined period. It
is a statistical statement that
summarizes transactions between
residents and nonresidents during a
period. It consists of the goods and
services account, the primary income
account, the secondary income account,
the capital account, and the financial
account. A BOP statement of a country
indicates whether the country has a
surplus or a deficit of funds, i.e. when a
country’s export is more than its import,
its BOP is said to be in surplus. On the
other hand, the BOP deficit indicates
that its imports are more than its
exports. The state of BOP is reflected in
the foreign exchange reserve.

- Foreign Exchange Reserve

Gross foreign exchange reserves

increased 2.5% to Rs.1246.22 billion in
mid-October 2022 from Rs.1215.80
billion in mid-July 2022. In the US dollar
terms, the gross foreign exchange
reserves decreased 0.6% to 9.48 billion
in mid-October 2022 from 9.54 billion in
mid-July 2022. Based on the imports of
three months of 2022/23, the foreign
exchange reserves of the banking sector
is su!icient to cover the prospective
merchandise imports of 9.6 months, and
merchandise and services imports of 8.3
months. The ratio of reserves-to-GDP,
reserves-to-imports and reserves-to-M2
stood at 25.7%, 69.5% and 22.5%
respectively in mid-October 2022. Such
ratios were 25.1%, 57.8% and 22.1%
respectively in mid-July 2022.

A small and import-based open

economy like Nepal needs to maintain
foreign exchange reserves at a
comfortable level. Considering this
necessity, the monetary policy has set a
target to ensure the foreign exchange
reserves at a level that can cover the
imports of goods and services for up to 7
months.

Inflation

The year over year consumer price

inflation stood at 8.50% in the third
month of 2022/23 compared to 4.24% a
year ago. Food and beverage inflation
stood at 8.05% whereas non-food and
service inflation stood at 8.85% in the
review month. Under the food and
beverage category, y-o-y consumer price
inflation of restaurant & hotel sub-
category increased 15.91%, fruit 12.06%,
alcoholic drinks 10.24%, milk products &
eggs 9.45% and tobacco products 8.44%.
Under the non-food and services
category, y-o-y consumer price inflation
of transportation sub-category
increased 21.15%, health 10.54%,
furnishing & household equipment
9.45%, education 8.11% and housing &
utilities 7.68%. The budget statement of
the government for 2022/23 has set the
goal of achieving an economic growth of
8% and maintaining inflation within 7%.

NEPSE TECHNICAL

Technical aspect is similar compared to

previous week in terms of multiple time
frame analysis. But daily chart was weak
due to sello!s near resistance area last
week. Sideways action is anticipated
next week at worst side. But due to
weekly chart bullish momentum, we can
expect higher high in the index also.
Since we are more upside biased from
technical point of view, trade can be
taken.

Why do we even need a table like

that? Such a technical table is
comparable to a highway signpost that
alerts us to impending danger, le" or
right turns, slick or bumpy roads, etc.
Additionally, we may think of our stock
market investment portfolio as a
financial project, and just as with other
real-world projects, we can use this
table to determine the project's ideal
status. Although these tables lack the
ability to forecast the future, they
provide us with the current situation
from which we may plan our next move,
assess our progress against our goals,
and even evaluate our performance.

Nepse on Technical Market Phase

Visual Observation from the above

Chart:

-Price is below 50 and 200 SMA, 50 SMA

is below 200 SMA

-50 SMA is weakly downward, and 200

SMA is still Sloping downward

-Volume is supporting the current

upswing since 20th October

-Momentum is Bullish and a Bullish

Divergence Setup is also obvious if we
take the swings of June and September

-Immediate support is at 1880 and

Immediate resistance is 1990 for this
week.

The market has Di!erent Phases named

Accumulation, Markup, Sign of
weakness, Distribution, Decline, and
Sign of Strength as illustrated below.

Based on the observations (indicators)

given above, market made an attempt to
recover twice , once in august and
another now. But last week sello!s
pushed market to Declining phase
again. Even if the market is trying to
create double bottom, which is highly
likely as per market breadth and
technical divergences and chart pattern
psychology, we still can not be sure that
market will reverse from here. But we
can be pretty sure now that
accumulation may start sometime in
near future or has already started since
Double Bottom or W itself is
accumulation pattern. So what is a
takeaway form this scenario? From this
scenario we can not inject 100% to trade
but we can take large position for the
long haul if we get undervalued stocks .
If we get undervalued stocks and if we
don’t invest now ,then when? Market is
almost 40% below the last Major high.
Most of the worst future things has been
discounted in the NEPSE index itself. In a
slight improvement of economic
indicators, market may become highly
active with full of bullish sentiment.

T+3 Stocks Trading

Setups (Based on Daily
Technical Chart)
Successful Trading is based on a few
core trading setups. Those setups are
the building blocks of di!erent setups.,
innumerable patterns and indicators. As
illustrated below, core setups can be
stated as,

-Breakouts

-Retracement

-Momentum

-Mean Reversion

-Support and Resistance

We evaluate the market as 100% bullish

if these situations (Tradeable Setups) are
consistently available, and 100% bearish
if they are not. If few are available, the
market bullish rating will also be low.

For Successful Trading setups, Major

index trend, Sector trend and Stock
trend, if all are aligned in same
direction, the probability of success is
high. If this combination of Index-Sector-
Stock is in same direction, Technical
Safe Entry Rating is given A for Bullish
and C for Bearish else B for Neutral
combination. Available tradeable set-
ups are given sector-wise. If Next
probable move is pointing right arrow
or up, if Technical safe entry rating is A
or B then trades could be taken in such
stocks provided that proper money
management and trade management
rules are applied. Cash allocation of
overall trading portfolio is as same as we
discussed above in Nepse Technical
Market Phase. Minimum 10 and
Maximum 20 positions are more
considered safe and well diversified.
Since trading is the game of probability,
higher the number of trades higher the
probability of expected return.

Things to consider:

If we catch breakout in Mean reverting

stocks, trade may fail. If we sell early in
momentum stocks, we may lose huge
profit.

Abbreviations:

MTM: Momentum Setups (buy high sell higher)

BO: Breakouts Setups (buy high sell higher for

trend following entry)

SR: Support and Resistance Setups (buy low sell

high)

MR: Mean Reversion Setups (buy the fear sell the

greed)

The technical setup table is mainly targeted to

T+3, short term traders as safe trading

environment.

Similar Compared to Last week,

and there are more than 75% safe
setups identified by our rules..
More than 50% stocks have
momentum setups and remaining
have Support and resistance
setups.

Sectors Techincal
Outlook
Banking Sector

Monthly Chart: Trend is downward.

Recent low-volume sector breakdown in
the month of May suggests that the
market may retest the 1575 Zone near
the 20% upside goal. It can experience
selling pressure before getting there
near the upside down-trending channel.
The commercial banking sector may hit
the near bearish downside slope of the
present channel, making it severely
inexpensive even fundamentally, if
current support around 1292 is broken
on a monthly closing basis, but this has
not happened till now due to dry of
supply and new buyers entered the
market.

Weekly Chart: Strong sello!s helped

sustain the breakdown below 1516 on
the week of May 31 or June 1st.
Additionally, the breakdown level has
already been tried and failed. The
banking sector displayed a false
breakdown in the week of September
18th, and current candles show bullish
price activity, at least greatly lessening
the bearish momentum. A"er breaking
out the 1334 level, the price action has
made sideways action in weekly
timeframe chart. We are waiting the
chart to make higher low but the candle
action shows higher momentum, which
if bring this sector directly to 150 level,
the selling pressure can be seen. Chart
momentum is highly bullish as of
previous week closing.

Daily Chart: With as series of higher

high and higher lows, the chart is
technically bullish. Trend trading and
momentum setups are favorable. We
can anticipate this sector to touch 200
SMA in few weeks of the similar trend
continues.

Relative Strength VS Nepse: Banking

sector is one of the strongest sector
since august by relative strength
measure.

Development Bank Sector

Monthly Chart: Monthly trend is

sideways even though the bearish
channel is seen, since only one
significant low swing of 4735 of last
December is broken down. The selling
pressure was not so strong even though
the sector came down. This is the reason
sector came back to this level on last
July to retest where it meets the sellers.
But still, the selling is not so intense
compared to the demand on last
January. At worst we can expect this
sector to come down till 2938 near the
low of June. Sector may face resistance
near the downward trendline. If this line
is broken , the selling may come near
4000 level.

Weekly Chart: Trends is bearish-biased

sideways since the long-term trend was
bearish at the background shown by
several swing low points taken down.
The recent upside break of the upper
trendline of bearish channel and the
breakdown point of last May with more
than 200% volume compared to last
breakdown volume has made this sector
sideways technically. At worst it will
meet the low of June which coincide
with the monthly chart low. At the
upside it has strong resistance on 4000
level where the sector looks heading as
of now.

Daily Chart: Daily chart has lots of

overhead resistances but series of higher
highs and higher lows has digested the
selling. The trend is still bullish even
though the trend is weak.

Relative Strength VS Nepse: Relative

strength is lagging which which may
slow down the trend strength .

Hydropower Sector

Monthly Chart: Since Monthly candles

have taken down the low of last October
only, we can still consider it sideways in
higher timeframe (Monthly) despites the
volatility in daily and weekly charts. The
weak selling pressure on last May made
it retest back the level on August. The
selling was more intense than
breakdown condition on May which has
made this sector to reach again near the
low of June. On monthly basis, the low
of June has been breached and made
this sector weak. In this scenario, the
sector may meet strong resistance in
sloping trendline which passes from
high of February and august.

Weekly Chart: Sector already got sello!

near the down trending line as expected
two weeks back. The increasing
volatility as seen by the widening down
trending lines means sector is trying to
become unstable by confusing both
bears and bulls. It means both bulls are
bears are out of control.

Daily Chart: Broadening chart

formation in this sector is making the
traders scratching their head. The
increasing volatility may bring this
sector near the low of 20th October at
worst, and at best the 2000 level which
coincide with the upper trendline of the
broadening formation. This chart
formation provides good mean
reversion trading setup.

Relative Strength VS Nepse: Sector

relative strength is very weak since
august.

Finance Sector
Monthly Chart: As per price action in
monthly chart this sector can be
regarded as sideways. The breakdown
volume on April compared to the
demand on December is low which has
made this sector to retest back to this
level on last July. The volume one the
swing high shall again make it retest this
level even though the sector come back
till 1230 level of June low. Sector has
faced the resistance on upper trendline
of current channel as expected last
week. The big fall of >60% since last
September can be contributed to its
volatility. The obvious volatility of this
sector can easily move the price index
till low of June if the current trend
continues. Sector is struggling to down
which means loss of bearish
momentum. As per current price action
it will either go sideways or bullish.

Weekly Chart: A"er taking out the high

of 1st week of July i.e. 1714 level, the
weekly chart has become Bearish based
sideways from previous bearish trend in
weekly timeframe. Currently index is
below the support level, but the sello!s
seen in monthly chart has the enough
force to drag it down till 1258 . Nearest
support is 1430. The Upper sloping
trendline acts as resistance.

Daily Chart: We can clearly see that the

sellers are more active and the buyers
are lazy. This action has made higher
swing points in series and almost flat
swing highs in a row. This is more a
bullish action for traders to take trades
in this sector.

Relative Strength VS Nepse: Strength is

lagging currently but not much bad.

Microfinance Sector

Monthly Chart: Monthly chart is Bullish-

Sideways a"er making September
monthly close below the first swing low
if December. This price action makes
this sector still strong. However, the
chart has lost its momentum as
evidenced from bearish channel.

Weekly Chart: A"er taking out the high

of 1st week of June through the level of
4753, the weekly chart has shown
character of bearish sideways. Index has
tested the upper trendline two weeks
back . Bulls are not available at higher
levels. Again this week, we saw more
buyers as seen in the overall index. This
is wait and see type of setup.

Daily Chart: Sector meet sello!s near

the supply area of 4500. Next move may
reached near the low of 20th October as
expected previous week. We cab expect
bullish momentum in next week as
evidenced by current volume and candle
action.

Relative Strength VS Nepse: Sector is

lagging but not bad to trade.

Non-life Insurance Sector

Monthly Chart: Monthly is sideways

a"er taking out the low of last
December. The sideways is more bullish
than bearish since the selling pressure
was weak as shown by volume. Also, the
current support level coincides with the
high prior CORONA pandemic which
suggests the current level as strong. As
per the monthly chart the sector is
simply playing retracement in a long-
term bullish trend as of now. However,
the Volatility is scary.

Weekly Chart: The weak price action of

this sector has risk of testing the low of
June again. The current broader index
has the possibility to bring this sector up
till 8800 level.

Daily Chart: We can clearly see that the

sellers are more active and the buyers
are lazy. This action has made higher
swing points in series and almost flat
swing highs in a row. This is more a
bullish action for traders to take trades
in this sector. This price action is similar
to finance sector. The upper sloping
trendline can be taken as next target.

Relative Strength VS Nepse: In general

Sector is weak. It is showing its strength
when the market is down due to its low
volatility in recent periods as per daily
chart.

Life Insurance Sector

Monthly Chart: Monthly chart trend is

Bearish a"er taking out the low of last
December and high of pre COVID. This
price action makes this sector
vulnerable to touch recent low of June
which is happening now.

Weekly Chart: The weak price action of

this sector has risk of testing the low of
June again. Recent bullish momentum
seen in overall index can pull this sector
till 10500 level at best.

Daily Chart: Daily chart is showing

bullish volatility. It means the sellers are
in higher areas swing by swing, but
buyers are consistent at similar price
levels. Next swing may even higher than
previous one. This price action is similar
to finance sector and non-life sector to
which it is highly correlated.

Relative Strength VS Nepse: In general

Sector is weak compared to NEPSE.

Manufacture and Processing Sector

Monthly Chart: Sector has turned to

Sideways in Monthly chart a"er taking
out the low of December. Since the
breakdown volume was less, sector has
made a retest again to that level on
august and has formed the pattern
which shows that long term buyers are
lazily buying whereas sellers look
aggressive. The current falling wedge
channel breakout in monthly chart is a
strong bullish signal. If this situation
remains till end of November, this is a
good sector to choose.

Weekly Chart: Weekly chart meet the

sello!s near the resistance area. Trend is
clearly rangebound.

Daily Chart: 7th November strong

selling may push this sector near the low
of 11th October and price action is
already sideways. At best it will meet
200 SMA by next week. This sector is
good candidate for trading.

Relative Strength VS Nepse: Recently,

the sector is showing good strength
against the broader index.

Others Sector

Monthly Chart: Sector has turned to

Bearish in Monthly chart a"er taking out
the low of June on September Monthly
Closing. Since the breakdown volume is
less, sector has made to retest back this
level technically even if it goes down
further. Current falling wedge formation
in this sector is a bullish hope.

Weekly Chart and Daily Chart: Strong

sello!s in the past week is not validated
by current week price action. We may
target the 1600 level as of now.

Relative Strength VS Nepse: The

relative strength is interesting for this
sector. It showing the character of mean
reversion. Very small profit target, quick
trades (T+3) may be found in this sector.
Now more bullish pattern is seen.

Investment Sector

Monthly Chart: Investment sector does

not have enough price index history to
observe its trend, however the loss of
momentum can be seen by the down
trending channel.

Weekly Chart: The weekly chart is

bearish. The sector is vulnerable to
make new low if it can not sustain in
current level.

Daily Chart: Daily chart is purely

sideways. The trade may be taken near
the lower support line.

Relative Strength VS Nepse: Last fall

was intense as shown by the relative
strength line. So, the sector can be
considered weak.

Hotels and Tourism

Monthly Chart: Index is just retracing in

a long-term trend as per monthly trend.
Strong Hammer candle on last June has
acts as the recent support.

Weekly Chart: Current sideways trend

meet the sello!s near the resistance
trendline last week. In current scenario
we can expect the index to go above the
resistance which is in opposite to
previous week anticipation.

Daily Chart: Since June, sector has

crossed above the 50 sma three time.
We can suspect that the accumulation is
going on in this sector which may
provide trading opportunities time to
time. We can expect the sector to
continue current bullish channel.

Relative Strength VS Nepse: The sector

is showing good relative strength
against the broader index recently which
may attract short-term traders.

Trading Sector

Monthly Chart: Monthly chart has

turned to sideways a"er taking out the
low of December. Since the breakdown
volume as weak, the sector has come to
retest the same level on last august
where the sellers dominated the level. At
worst, we can except the sector to come
down till 1520, which is the low of June
due to the current loss of momentum
and last month selling pressure.

Weekly Chart: Weekly chart is in bearish

trend with series of multiple lower high
and lower lows. Current price action is
just a pause in the current downtrend.
For this trend to stop, the high of July
must be taken out by intense buying
pressure.

Daily Chart: Current broadening

formation makes this sector more
volatile and provide trading opportunity
near the lower trendline of the
broadening formation.

Relative Strength VS Nepse: Relative

strength pattern is weak.