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Infy, Tata Power, Varun Beverages among 42 stocks ready to rally, shows MACD

When the MACD crosses above the signal line, it gives a bullish signal.

Updated: Nov 05, 2019, 10.53 AM IST
The momentum indicator signalled a bullish crossover on these counters, hinting at possible upsides.
NEW DELHI: Benchmark equity indices have now advanced for seven straight sessions. Technical indicators are largely positive, even as oscillators are nearing the overbought zone.

Back-to-back positive closings for the indices are having a rub-off on the broader market, where at least 42 such stocks now look stronger on technical charts.

These stocks might be heading higher in the coming days, suggests technical indicator moving average convergence divergence or MACD.

The momentum indicator signalled a bullish crossover on these counters, hinting at possible upsides. Strong trading volumes on many of these counters are lending credence to the emerging trend.

The list included Infosys, Tata Power, Max Financial, Karur Vysya Bank, Torrent Power, Varun Beverages and Shalimar Paints.

Bajaj Finserv, Rallis India, Cholamandalam Finance, Century Plyboards and Music Broadcast are among other stocks showing bullish crossovers on the MACD indicator.

1 up 42

1 up 2

1 up 3

The MACD is known for signalling trend reversals in traded securities or indices. 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.

Data showed 33 stocks are signalling bearish trends. They included M&M, Hindustan Zinc, Berger Paints, Ashoka Buildcon, Amara Raja, Divi’s Labs, HDFC AMC and Kansai Nerolac Paints.

1 down 33

2 down 33

Analysts say the MACD indicator should not be seen 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’ recommendation using a single valuation ratio.

As for Nifty50, Sameet Chavan of Angel Broking sees no signs of any trend reversal yet. He expects to see the index taking out the 12,000 level soon.

“Traders are advised to avoid taking any contrarian bets and use intraday dips as buying opportunities. The immediate supports for Nifty are placed at 11,843 and 11,776 levels,” he said.

Nagaraj Shetti of HDFC Securities said a High Wave pattern at the key overhead resistance indicates confusion. “The possibility of a downward correction can't be ruled out from the highs. A sustainable move below the 11,850 level may confirm a negative reversal pattern at the highs,” he said.

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Understanding MACD
bajaj finserv 1 - snip

A close look at the stock chart of Bajaj Finserv shows whenever the MACD line has breached above the signal line, the stock has shown an upward momentum and vice versa. On Tuesday, the scrip traded 0.82 per cent higher at Rs 8,777 on NSE.

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