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Golden Cross, ahoy! Sensex, Nifty charts drop hints this rally has legs

A number of stocks too have formed similar ‘Golden Cross’ on their daily charts.

Updated: Nov 05, 2019, 11.44 AM IST
Sensex hit a lifetime closing high on Monday and analysts expect it to cruise further 5-16 per cent in next 6 to 12 months.
BSE flagship Sensex formed a ‘Golden Cross’ on daily charts on October 30, as it headed for its all-time high point. This, some say, confirms the longevity of ongoing rally.

Golden Cross refers to a phenomenon when a short-term trend indicator, like 50-day simple moving average (SMA), crosses over a long-term trend indicator, say 200-day simple moving average, to the upside. Technical analysts regard this event as a strong bullish indicator.

The 50-day SMA for the 30-share index stood at 39,878 and the 200-day SMA at 38,859. Sensex hit a lifetime closing high on Monday and analysts expect it to cruise further 5-16 per cent in next 6 to 12 months.

Sahil Kapoor, Chief Market Strategist and Associate Director at Edelweiss, pegs Sensex in the 46,000-47,000 range by June 2020, a 16 per cent potential upside from current level, whereas G Chokkalingam of Equinomics Research and Advisory, is a bit conservative and projects 5-8 per cent upside by March 2020.

NSE barometer Nifty, too, is on course to form a ‘Golden Cross’ on daily charts. “There is a formation of higher top and higher bottom. Nifty is currently above the 50-day and 200-day SMAs and 50-day SMA is on the verge of breaking above the 200-day SMA. That makes a Golden Crossover imminent, which is a very good sign,” said Nirav Chheda, Senior Technical Analyst at Nirmal Bang.

Naveen Kulkarni, Head of Research of Reliance Securities, said the index would continue to move forward and has a target of 12,800 for April 2020.

A number of stocks, including some leading names, too have formed similar ‘Golden Cross’ on their daily charts, indicating strong positive momentum in them.

They include L&T, Ajanta Pharma, SJVN, Dr Reddy’s, Ramco Cements, Divi’s Lab, RIL, Avanti Feeds, TCS, Hero MotoCorp, HDFC, Gulf Oil and Adani Ports, among others. Overall, more than a hundred stocks in BSE500 index have seen ‘Golden Cross’ formations on daily charts.


Among Sensex stocks that have seen the formation of Golden Cross, analysts have a positive view L&T, which reported a 6.83 per cent year-on-year (YoY) rise in net profit at Rs 2,770.43 crore for September quarter.

Morgan Stanley has a price target of Rs 1,753 while CLSA expects the stock to hit Rs 1,730. Macquarie sees it as a preferred bet to stay with in a volatile market. The stock performance has, however, been flat year-to-date, gaining just 0.73 per cent.

Global brokerages, however, do not see much upside in Hero MotoCorp. CLSA has a ‘sell’ call on the automaker while Macquarie is ‘neutral’ on it, as they see BS-VI transition as a tough challenge ahead for the company.

Dr Reddy’s stock is up 17 per cent in the last one year. It beat Street estimates to double September quarter profit to Rs 1,093 crore compared to Rs 504 crore reported for the same period last year.

Credit Suisse has maintained an ‘outperform’ rating on the stock with a price target at Rs 3,055, which translates into over 9 per cent potential upside.
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