Three power stocks that are breaking out on the charts

The Indian stock market is ablaze with optimism as the Nifty approaches the 26,000 mark, signalling a bullish phase that continues to gather momentum.

Last week’s spotlight fell on the Bank Nifty, which soared to 54,000 following a powerful short-covering rally led by major private lenders including HDFC Bank Ltd, ICICI Bank Ltd, Axis Bank Ltd, and Kotak Bank Ltd.

But bank stocks aren’t the only ones riding a rally. India’s power sector has resumed its upward trend, and these three power company stocks are breaking out on the charts and could potentially ride this momentum to new heights.

NTPC

NTPC Ltd, India’s largest power conglomerate, is crucial in meeting the country’s energy demands. Known for its robust portfolio of coal-based power plants and ongoing efforts to expand into renewable energy, NTPC remains a key player in India’s energy sector.

Technically, NTPC is charting an upward path on its weekly bar chart, showing a consistent higher high—higher low pattern. This structure, aligned with Dow Theory, confirms that the bulls have taken control. The stock recently broke out from a previous high of around ₹390 and underwent a retest phase in mid-September. This retest occurred within a falling channel, but the stock broke out again on the bullish side, reinforcing its upward trajectory.

The chart’s structure now suggests that ₹400 has formed a base. With the breakout in place, NTPC could potentially be ready for new milestones.

Tata Power

Tata Power Ltd is another stalwart in the Indian energy sector. Its diversified portfolio spans both conventional power generation and renewables. Its strategic solar and electric vehicle charging infrastructure initiatives further enhance its growth potential in the evolving energy landscape.

On the technical front, Tata Power has staged a breakout on the Daily 0.25% X 3 Point & Figure* (P&F) chart, surpassing a triple top breakout level, a pattern known for signalling bullish continuations.

Its recent retracement through a bearish anchor column shows that the stock has not followed through on the downside, suggesting that the retracement was simply a part of the larger bullish trend.

Additionally, the retracements around the 20-column exponential moving average (EMA) have been well-supported, indicating that this zone serves as a demand area for the stock.

Tata Power could potentially maintain its upward momentum as the bullish sector tailwinds continue, unless the triple top breakout is negated below the ₹425 level.

What is a point-and-figure chart?

A point-and-figure chart is a chart method using Xs and Os. The X denotes bullish moves, while the O denotes bearish moves. Unlike traditional time-based charts, P&F charts focus solely on price changes and are considered noiseless. They filter out minor price fluctuations, highlighting significant trends and reversals. The lack of time constraints gives a clearer picture of supply and demand dynamics, helping chartists make more informed decisions.

JSW Energy

JSW Energy Ltd is a leading player in the power sector, with operations across various energy segments, including thermal and hydro. Its focus on renewable energy expansion and strategic growth initiatives positions the company as a significant contributor to India’s sustainable energy future.

On the Daily 0.25% X 3 Point & Figure chart, JSW Energy has broken out of a crucial resistance zone, turning that level into a firm demand zone.

Historically, this stock has demonstrated a pattern of breaking out from similar ranges, only to see those resistance levels flip into strong support.

Currently, JSW Energy is exhibiting an Anchor Column Follow-Through (AFT) pattern, which occurs after a successful test of the demand zone. This bullish follow-through is a powerful signal that the stock could potentially head for a new bullish phase, with the potential to scale fresh highs as it benefits from the renewed vigour in India’s power sector.

The sector rotation might be challenging to time, but with the right tools and a sharp focus on breakout stocks, opportunities could be there for the taking.

Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only. 

Brijesh Bhatia has over 18 years of experience in India's financial markets as a trader and technical analyst. He has worked with the likes of UTI, Asit C Mehta, and Edelweiss Securities. Presently he is an analyst at Definedge.

Disclosure: The writer and his dependents do not hold the stocks discussed here. However clients of Define edge may or may not own these securities.