MACD shows Infosys, Asian Paints, JSPL among 41 stocks all set to gain even in a weak market
The MACD is known for signalling trend reversals in traded securities or indices.
Despite this, over three dozen largecap and midcap stocks on NSE could see strong price-wise action in the coming days. Some 41 stocks are looking strong on technical charts for a bounce, as suggested by moving average convergence divergence, or MACD.
The momentum indicator signalled an bullish crossover on these counters, hinting at possible upsides. These counters have been witnessing strong trading volumes of late, lending credence to the emerging trend.
The list included Infosys, Asian Paints, Jindal Steel & Power, United Spirits, JSW Steel and UltraTech Cement besides HDFC Life Insurance, Equitas Holdings, DCB Bank, Quess Corp, GSPL, IGL, Dalmia Bharat Sugar and Tata Sponge Iron, among others.
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.
Meanwhile 69 stocks are showing a bearish trend. They Bharti Airtel, DHFL, Allahabad Bank, Indiabulls Real Estate, Colgate-Palmolive and Petronet LNG.
RBL Bank, UCO Bank, Radico Khaitan, PNB Housing Finance, Lakshmi Vilas Bank, VRL Logistics and The Mandhana Retail are also looking weak on technical charts.
“Traders could find opportunities on both sides of the trade and, hence, one should remain stock-specific with a proper risk management strategy,” said Sameet Chavan of Angel Broking.
Analysts said 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 based on a single valuation ratio.
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.
As for Nifty50, it has been consolidating and its earlier support at 11,640 is acting as a key resistance. “The index needs to convincingly surpass the hurdle in the 11,640-11,700 zone to regain strength. On the flipside, the 11,460-11,430 zone is the immediate support range to watch out for. The index is witnessing a time-wise correction. Unless we see a breakout on either direction, traders should maintain a stock-specific approach,” Chavan said.
The odds are in favour of the bears as long as Nifty50 trades below the swing high of 11,640, said Gaurav Ratnaparkhi of Sharekhan. “The broader market indices are already reflecting inherent weakness. For Nifty50, the 11,500 and 11,461 levels will be the key levels on the downside below which it will be prone to a larger decline.”
A close look at the stock chart of Infosys shows whenever the MACD line has breached above the signal line, the stock has shown upward momentum and vice versa. On Tuesday, the scrip traded 0.3 per cent higher at Rs 781.85 on NSE.