Stochastic and Momentum Analysis of Nepalese Stock Market

Abstract

The stochastic oscillator is one of the popular tools used by technical analysts. The tools are used mainly to find the overbought and oversold position in the stock market. The stochastic values are between 0-100 which helps to determine the market scenario. The two stochastic indicators are comprised of two lines namely; %K and %D. The investors using the short-term moving average follows %K and for long-term moving average for %D. Though, both are used for buy signal or sell signal by the investors. The basic concept is if, the value of %K is seen above %D, which reflects to sell position, which in context to Nepalese stock market, the scenario is seen during the month of June-July of every fiscal year. At the same time, momentum uses transaction signal or trade signal or the zero ‘0’ line to find the bearish or bullish trend of the market. The momentum of NEPSE index clearly pictures out the bullish and the bearish trend for a specific duration. If the momentum line touches the ‘zero line’, the NEPSE has changed its trend.