Energy's Reliance On One Stock Proves Troublesome

JC Parets
October 10, 2020

Energy stocks in India, the US, and other global markets have been a disaster for a long time. In fact, despite strength in stocks as an asset class, we've been finding short opportunities in the sector.

With Reliance being 33% of the Nifty Energy Index, let's take a look at what's happening in the space and how we're approaching it.

First, let's start with Reliance, which continues to consolidate below resistance at 2,340-2,375 as with momentum works off its divergence through time. When the stock was in a strong uptrend, it was a clear tailwind for the sector, but now it is a headwind.

Click on chart to enlarge view.

And here's Nifty Energy failing at multi-year resistance near 16,500 for the fourth time. Not even a nearly 300% rally in Reliance since March could help spark a structural breakout in the Energy sector...that's how bad breadth among its components is.

On a relative basis, it continues to fall after failing to break through multi-year resistance near 1.41.

What's clear is that there remains no reason to be erring on the long side of this sector. If anything, this is one of the sectors we can be looking for absolute and relative short setups.

In the coming days, we'll be releasing our Q3 Playbook which discusses this topic further and the rest of the major market themes we're taking advantage of this quarter.

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Thanks for reading and please let us know if you have any questions!

Allstarcharts Team

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