A breakout above the upper trendline for the Nifty Energy index could set off a strong rally, similar to the one seen in 2023 when it surged over 50%.

The Nifty Energy Index (NIFTYENERGY.NSE) is gaining traction and appears primed for a potential breakout, backed by a textbook trend resumption pattern and bullish technical cues, according to SEBI-registered analyst Rajneesh Sharma.

Sharma said the recent rebound off the 0.618 Fibonacci retracement level near 30,600 indicates the primary uptrend is likely resuming after a healthy correction, with buyers taking charge and driving the index above the 0.5 Fib level at about 33,361.

Currently, the index is testing the critical 0.382 Fib level near 36,116, a key technical and psychological barrier.

Sharma noted the steady long-term uptrend, with weekly candlestick chart indicators consistently making higher lows, signifying strength.

The analyst said the index is positioned within the mid-to-upper band of the channel, a level at which markets typically either accelerate or take a breather.

According to Sharma, a breakout above the upper trendline, which is currently serving as dynamic resistance, could set off a strong rally, similar to the one seen in 2023 when it surged over 50%.

These breakouts are typically driven by trend-following strategies, algorithmic buying, and short-covering, with little resistance standing in the way until the previous all-time high around 45,000.

Sharma said the index is currently testing the 36,116–36,400 zone, and a breakout above this range could unlock further bullish momentum.

A weekly close above 39,526, a major resistance marked by the 0.236 Fibonacci level, would likely confirm continuation toward higher levels.

If the price rises above the upper trendline, it could accelerate toward the all-time high near 45,000.

However, failure to hold above 36,116 may lead to a pullback toward 33,300–34,000, and a drop below 33,000 would significantly weaken the bullish setup.

A weekly close above 39,526, a key resistance marked by the 0.236 Fibonacci level, would signal a continuation of the uptrend.

On the downside, if the index fails to hold above 36,116, it may retrace toward the 33,300–34,000 support zone.

A break below 33,000 would undermine the bullish structure and warrant a reassessment of the trend, Sharma added.

The index was 0.4% higher on Tuesday at the time of writing. It has gained 3.3% year-to-date.

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