NEPSE might go on correction: Why I emptied my portfolio by selling a profitable stock

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I bought MNBBL on September 20 at Rs. 333 per share and sold on October 14 at Rs. 356 per share.

Why did I sell the shares at a minimal profit of 7%?

Reasons to buy

The Development Banks sector was going through a sideways trend. I figured if the sector finally gets out of this sideways curse and rises, the best companies of the sector would witness a surge in stock prices. If you ask a fundamental analyst (which I am not), they will tell you that MNBBL is one of the best performers in that sector. Thus, I bought MNBBL on 20th September at Rs. 333 per share.

Well, the sector gained indeed, but MNBBL was still going sideways. I did not liquidate my position because the stock was not losing significantly either. Then, out of nowhere, the stock gained massively on October 12 with an incredible amount of volume.

Notice the spike in volume in MNBBL's candlestick chart.

Reasons to sell

However, the stock closed red the next day with a diminished amount of volume. If the stock was really set to go up, it would not show a decline in its activity like this.

I felt like investors freaked out of the intense rise in volume and price in a single day. Well, I do not need to know why a price change happened. I just have to play on those price changes.

Thus, sensing a loss of investor optimism, I sold the next day, i.e. October 14 at Rs. 356 per share.

MNBBL bought and sold at a 7% profit.

NEPSE has entered the phase of uncertainty

The initial bubble that formed in February burst and the index plunged to a low at 1150 levels. From there, NEPSE showed a strong uptrend and gained about 35%. However, since nothing can keep going up forever without a correction, the index seems highly undecisive at the present.

This is further supported by a decline in volume and the index losing minimal points in consecutive days. Although I can’t say with certainty that the trend has reversed, I am sure that investor optimism has diminished, at least for some time now.

The initial bubble that formed in February burst and the index plunged to a low at 1150 levels. From there, NEPSE showed a strong uptrend and gained about 35%.

The index seems to be testing support at 1,540 levels. The more times the index tests support or resistance, the higher its chance is of breaking that level. It will be interesting to see what happens to NEPSE in the few trading days remaining before Dashain. NEPSE will close for five days during Dashain. Since time months after Dashain is dividend declaration and quarterly report announcement season, NEPSE might be more volatile than normal.

NEPSE testing support (signaled by the blue line.)
NEPSE testing support (signaled by the blue line.)

Until then, I am staying in cash. I have liquidated my position and am free from NEPSE (if we ignore the 200 units Laxmi Unnati Kosh that I will keep with me forever.)

Click here to access all the articles of My NEPSE Trading Journey Series.

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