Railway stocks could be set for a strong finish to 2024

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Subscribe to enjoy similar stories. After a turbulent October marked by widespread selling across stock markets, some sectors are beginning to show signs of recovery, with the railway sector standing out. Despite a steep downturn in many railway stocks—some dropping over 20% from recent highs—the sector appears poised for a technical reversal, particularly in the short-term trend.

In 2023, the sector had posted a remarkable 92% gain, reshaping long-term chart patterns and opening new opportunities for investors. Read this | Two hugely underperforming stocks set for a big turnaround? This article explores the technical aspects of the railway sector, delves into the concept of Equal-Weighted Indices, and analyses how both technical and seasonal factors could shape the sector's outlook as we head into the year’s final months. Without a dedicated sectoral index, the Definedge Railways Index serves as an Equal-Weighted Index for tracking the Railway sector’s performance.

An "Equal Weighted Index" is a stock market index where each stock holds equal weight, irrespective of its market capitalization. This approach provides a more balanced view, preventing large-cap railway companies from overshadowing mid- and small-cap stocks that may be experiencing stronger growth. The daily chart of the Definedge Railways Index reveals a bullish reversal pattern, signalling a potential upward trend for the sector.

Notably, a Double Bottom formation emerged, with a breakout last week. This classic technical pattern often suggests a strong reversal from bearish to bullish conditions, typically forming after a prolonged downtrend as the price tests a support level twice, failing to break lower on the second attempt before rallying. In this