IS IT OVER FOR ENERGY/POWER SECTOR?(Proper analysis for the sector)

Energy sector/Power sector of Indian Stock Market has seen significant fall in the past 6 months.

So, this time every investor has one question in mind that is this selling over or more to come?

Let's head to some Technical analysis for answering that question.

Here, we have a monthly chart of Nifty Energy Index.

• In this candlesticks chart we can clearly see that the energy index has corrected well over 30% in past 6 months.

Many stocks have even corrected more than that as well.

So, let's checkout some signals that  the Technical charts are giving us for future.

Here, we can see a Upward Trendline that says that market is yet bullish for the above chart 

Market( the index) touched this trendline previously and bounced from that area .

So, one can assume that there is a high probability for the respective chart to bounce from that level.

• It is also possible that market will go into sideways mode rather than being bullish and after that it will decide the nature of the trend.
• But this trendline suggest that the selling is maybe exhausted for now and maybe market will make a base before going upside.
• See, one more thing we need to keep in our mind that market is neither going to go up in one go nor it will only go down. It is a series of waves.
• For every bull move we need to have some retracements for market to get the original move stronger .

We've talked about Retracement in the above points. So why not see that on the Technical chart:

In this chart, the index seems to take support on 61% retracement on fibonacci retracement tool.

For those who don't know what is fibonacci Retracement tool,

• Fibonacci Retracement is a tool that helps technical analyst to find the retracement of the moves to find possible end of the move.
• Generally, 50% to 61% range is called THE GOLDEN RATIO.
• Means , there is a high probability for any stock or chart to take a bounce from there or to consolidate in that range.
• So, the Energy Index is exactly in that range making value investors to buy on that dip for long-term perspective.

One can also see that it is combining with the important trendline as well, giving it much importance as two indication fall at the same place.

Let's look at one more important concept of technical analysis in The Nifty Energy Index:

Technical Analysis has an concept of Change in Polarity (CIP).

That means when resistance becomes support or when the support becomes resistance.

In this Nifty Energy Index Chart we can see a purple line that shows the resistance level for the index previously .

• When the index crossed that level successfully and bounced and now it has came back to that level and making a support on that level.
• It maximise the probability of an analyst who is having trouble to analyse.

Now, we can understand that everything is combining at the same place

• Firstly, the trendline support making it and important support level
• Then, the fibonacci support level 
• Then, the change in polarity giving important weight of evidence to the analyst.

Definitely, this is not an co-incidence. Many technical signals at one place make this support an important level for value buying investors.

*Disclaimer: This is not any recommendation. Consult your financial advisor before investing.

For individual Energy/Power sector related stocks analysis 

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