Technical analysis: Recent correction normal; buying signal in Nepse

Looking at the graph of Nepse, the recent downfall from the 1083 level is just another normal correction following the local bourse rally from 754 level.

After series of downfall and massive plunge of more than three percent on Monday, the Nepse index has now breached the oversold zone of 30 level on RSI oscillator. Currently, the benchmark index stands at 25.64 level on RSI oscillator, which is very much a reversal zone.

In addition, most of the sub-groups’ RSI level are also hovering below the oversold zone, indicating the overall stock market of Nepal is on oversold or reversal zone.

So, most of the smart investors will take this correction as buying opportunity, following a series of bullish rally in past months, rather than selling in panic.

Moreover, the RSI indicator of Nepse gives a very strong reason for not to panic at the current level. And going by the past trend of Nepse, we can clearly see that the market index has every time made a bounce back after its RSI level reached oversold zone, which we have depicted as a and b in graph above.

Disclaimer: We have written this article based on the technical aspect of the market. We cannot be held accountable for any decision made on the basis of this article.