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50 stocks are all set to rally in a depressing market, shows MACD

Some counters have witnessed strong volumes, adding credibility to the emerging trend.

, ETMarkets.com|
Updated: Aug 16, 2017, 04.08 PM IST
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In technical analysis, the MACD indicator alone may not be sufficient to help decide an investment call.
In technical analysis, the MACD indicator alone may not be sufficient to help decide an investment call.
Equity benchmark BSE Sensex snapped a five-day losing streak on Monday, with momentum indicator moving average convergence divergence, or MACD, signalling that 54 stocks witnessed an upward crossover or bullish crossover on BSE, indicating that they have begun an upward journey.

Stocks that witnessed bullish crossovers included SpiceJet, Meghmani Organics, JSW Steel, Voltas, Grasim, MOIL, KNR Constructions, Aegis Logistics, Asahi India Glass, Mahanagar Gas and others (see table).

Some of these counters have also witnessed strong volumes, adding further credibility to the emerging trend.

Ashoka Buildcon, Emkay Global Financial Services, National Peroxide, Hathway Cable, Sunil Agro and Manpasand Beverages are among the other stocks that witnessed bullish crossovers on Monday.

50 stocks are all set to rally in a depressing market, shows MACD

The MACD is a trend-following momentum indicator that shows a relationship between two moving averages. MACD 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.

A ‘buy’ signal occurs when the MACD rises above the signal line and vice-versa.

In technical analysis, the MACD indicator alone may not be sufficient to help decide an investment call.

Traders should make use of other indicators such as Fibonacci Series, RSI, candlestick patterns, Bollinger Bands and stochastics to confirm any trend.

It is advisable to consult a financial expert before buying or selling a stock based on such technical indicators.

As many as 30 stocks witnessed bearish crossovers on BSE, signalling a longer bear grip on the market. The list had names like Vedanta, Hindalco, Power Finance, Fortis Healthcare, Shipping Corporation, Parsvnath Developers, Jindal Worldwide and Hatsun Agro. (See table: MACD crossed below signal line)

50 stocks are all set to rally in a depressing market, shows MACD

The 30-share index closed 235 points, or 0.75 per cent, up at 31,449 on Monday, while the Nifty50 closed 83.35 points, or 0.86 per cent, up at 9,794.

“We expect the Nifty50 to remain under pressure for the next few weeks. The ‘89 EMA’ levels of 9,600 and 9,580 on the daily chart could be tested soon. Traders are advised to remain light and avoid taking undue risks as individual stocks may continue to correct over the next few days,” said Sameet Chavan of Angel Broking.

Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, said the real test for the bulls lies in holding Monday’s gains.

“If the index consistently manages to sustain above the 9,800 level, there will be some hope of it bottoming out at around 9,700 level. On the downside, if the 9,752 level is broken in the next trading session, then long side traders need to be on alert,” he said.

Understanding MACD
50 stocks are all set to rally in a depressing market, shows MACD

A close look at the chart of SpiceJet shows whenever the MACD line has crossed above the signal line, the stock has always shown an upward momentum.

A similar crossover was recorded on Monday when the Nifty50 settled near 9,800. Shares of SpiceJet settled 6.29 per cent higher at Rs 122.

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