Stock Market

277 stocks poised to see upward march, shows MACD

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NEW DELHI: A smart recovery in the last two sessions has changed the technical setup not only for the domestic equity indices, but also for dozens of stock, which, riding on heavy volumes, look poised to see positive price actions. As many as 277 stocks on NSE showed strength on the daily charts, as suggested by momentum indicator MACD, or moving average convergence divergence. The technical indicator signalled an upward crossover, or bullish signal, on these counters, hinting at possible upsides. Some of these counters have also been witnessing strong trading volumes in recent times, adding further credibility to the emerging trend. The list includes Reliance Communications, Suzlon Energy, Bank of Baroda, Vodafone Idea and GMR Infrastructure. Others included Tata Power, Trident, PFC, NCC and Motherson Sumi, HDFC, Just Dial and Exide Industries.

Stocks such as Edelweiss Financial Services, Dish TV and RCF also witnessed upward crossovers, suggesting possible upsides on these counters.

The MACD is known for signalling trend reversal in a traded security or index. It is the difference between the 26-day and 12-day exponential moving averages.

A nine-day exponential moving average, called the signal line, is plotted on top of the MACD to reflect ‘buy’ or ‘sell’ opportunities.

When the MACD crosses above the signal line, it gives a bullish signal, indicating that the price of the security may see an upward movement and vice versa. Meanwhile, ILFS Transportation and Entertainment Network witnessed bearish crossovers on the daily charts. The MACD indicator should not be read in isolation as it may not be sufficient to take a trading call, just the way a fundamental analyst cannot give a ‘buy’ or ‘sell’ call using a single valuation ratio. Market veterans say the MACD alone may not be a good enough to help take an investment call.

Traders should make use of other indicators such as Relative Strength Index (RSI), Bollinger Bands, Fibonacci Series, candlestick patterns and Stochastic to confirm an emerging trend. For Nity50, the 10,540-550 zone may now provide tough resistance, while the 10,400 level is likely to act as a strong support.

The index formed a Dragonfly Doji on the daily chart on Monday.

Usually such a pattern is registered at absolute bottom, said Mazhar Mohammad of Chartviewindia.in. “As the Dragonfly is visible near the three-day-old bottom, the benefit of doubt can be given to the bulls.

If the index manages to clear its immediate hurdle at 10,547 on Tuesday, then it can expand the pullback move to the 200-day moving average placed at 10,780 level,” he said.

Traders are advised to trail stop losses at 10,390 and look for a target of 10,770, he said. Meanwhile, Nifty has negated the formation of lower highs and lower lows of last six weeks and closed above multiple hurdles in the 10,450-10,480 zone. Chandan Taparia of Motilal Oswal Securities said the index needs to hold above 10,450 to witness an upward move towards the 10,550 mark. Downside support has shifted higher to 10,400 level from 10,350.

For the day, the index rose 40 points, or 0.38 per cent, to 10,512. Understanding MACDA close look at the stock chart of RCom shows whenever the MACD line has breached below the signal line, the stock has witnessed a downward momentum and vice versa. On Monday, RCom settled flat at Rs 11.65 on NSE.




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