According to the NSE data, within five years between 2019 and 2023, over 120 million investors were registered in the Indian stock market. These traders looking to navigate the volatile area can benefit from two durable approaches: fundamental and technical analysis of stocks.
While the former focuses on a company’s financial health and prospects, the latter explores price and volume charts to identify potential shading options.
In this article, we will explore the sector-specific technical analysis. We will also see how it is emerging as an essential tool for identifying industry trends. So join us as we dive deeper into this topic.
Understanding technical analysis
It uses various indicators and chart patterns to gauge market sentiments and predict future price movements. They can be based on assumptions that historical prices and volume data can provide to predict future market behaviour. This is especially helpful for short-term trading when a trader uses this information to make buying or selling decisions.
In India, technical analysis involves studying the price patterns of the NSE and BSE. Investors use multiple tools and indicators to predict short-term price movements. Apart from this, they also keep an eye out for global market trends and how they influence the Indian market.
Technical analysis tools
Some of the common implements used include:
- Moving averages
- Stochastic Oscillator
- Fibonacci retracement
- Bollinger bands
- Moving average convergence divergence
Apart from these, traders have other tools for stock sector analysis, such as Aroon and parabolic SAR. They provide a better insight into the share market’s past, present, and potential future, which helps you make risk-free choices. However, it is important to remember that no tool is foolproof, and to develop better strategies, you can use them together.
Applying technical analysis to sectors
These evaluations are not just for individual stocks. They can also be applied to sector ETFs or indices. By applying these tools, investors can gain valuable insight into an industry’s overall health and direction. Here is how it is done:
1. Identify key sectors
You can consider the current economic climate and future trends before analysing. For example, technology and consumer discretionary sectors might be the focus in the growth phase. Conversely, utilities and consumer staples might be more attractive during a recession.
2. Analysing sector performance
To get a stock market technical analysis, you can utilise charts to identify friends within the ETF sector. You can look for moving average breakouts, support, and resistance levels to gauge potential interior exit points.
3. Compare sector performance
It is essential to analyse the strengths of different sectors. You can check if a particular sector is outperforming or underperforming the broader market. With this data, you can get valuable clues about investor sentiment and potential rotation of funds.
Benefits of sector-specific technical analysis
1. Targeted investment strategies
Investors can tailor their plans to risk tolerance and investment goals by focusing on specific sectors. As investors can assess a smaller pool of assets, they can conduct a more thorough analysis of a promising sector.
2. Enhanced risk management
Technical analysis can help identify potential support levels that could act as a safety net in a downturn. This targeted approach minimises potential losses compared to mindlessly following the broader market.
3. Identifying early trends
With the help of a technical screener for Indian stocks, investors can identify trends within a sector before they become mainstream. This helps them to get higher returns. It provides objective data to support investment decisions, which can help investors avoid impulsive actions.
Therefore, sector-specific technical analysis equips investors with the ability to navigate the highly volatile stock market. By combining this approach with fundamental analysis and proper risk management, traders can decide to enhance their returns.
Bottom line
There are severaltechnical screeners for Indian stocks. However, you must choose a reliable one. With Motilal Oswal’s Research 360, you can perform such evaluations. You can use this application to make smart investment decisions by choosing the right stock to invest. The best part about this app is that you will receive the fundamentally and technically analysed data in an organised way.
Be First to Comment