Energy index dips but witnesses breakout

The benchmark indices traded weak from the opening and corrected further in the afternoon session and the Nifty Energy index was no exception to it. However, Nifty Energy index traded marginally down with 0.4 per cent losses, dragged down by GAIL and Hindpetro. GAIL and Hindpetro which hold 9 per cent in the index closed in red with 3 per cent and 2.9 per cent losses. GAIL is expected to split businesses into pipeline construction, operation and marketing of natural gas. On the contrary, the Powergrid and Tata Power which form 7 and 2.4 per cent of the index closed more than a per cent up, resisting any further fall in the index.

Technically, the index saw a horizontal trendline breakout at 14,480, however, it retreated and fell sharply in the first week of February. Thereafter, the stock moved zig-zag forming a kind of Inverse Head and Shoulders pattern. On April 24, the index gave a neckline breakout at 13,750 levels and witnessed a pullback on April 25, up to the neckline level. Volumes were falling, but justifiable and 14-period RSI is at 57, showing momentum. We may see some more upside in the index above the 13,955 levels.

Fluctuation in Crude oil prices would lead to a daily tug-of-war between oil exploration and marketing companies. Nevertheless, the power companies may help maintain the stability of the index.