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SBI, Bata India, Cadila among 50 stocks set to rally, shows MACD

Some of these counters have been witnessing strong trading volumes.

, ETMarkets.com|
Last Updated: Mar 27, 2018, 03.53 PM IST
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When the MACD crosses the signal line, it flashes a bullish signal on the charts, indicating that the price of the security may see an upward movement.
NEW DELHI: Life is back in stocks, borne out by today's rally and Monday's spectacular rebound. The tide seems to be turning, with momentum indicator MACD signalling upward crossovers for 50 stocks on the NSE.

MACD, short for moving average convergence divergence, is known for identifying trend reversals.

The stocks that saw bullish crossovers include State Bank of India (SBI), Power Finance, Bata India, Cadila Healthcare, Indiabulls Housing Finance, ICICI Prudential Life, Varun Beverages, KEI Industries, PI Industries, ONGC and HCL Technologies.

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

Other stocks that saw bullish crossovers included Berger Paints, Sudarshan Chemicals, Den Networks, Jammu & Kashmir Bank, Tasty Bite and Balaji Telefilms.

MACD is a trend-following momentum indicator and 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 MACD crosses the signal line, it flashes a bullish signal on the charts, indicating that the price of the security may see an upward movement, and the vice versa.

MACD crossed above signal - March 26


However, the rider is MACD alone may not be sufficient to help take an investment call. Traders should make use of other technical indicators such as Relative Strength Index (RSI), Bollinger Bands, Fibonacci Series, candlestick patterns and stochastic to confirm any such trend.

Retail investors should consult a financial expert before buying or selling a stock based on such technical indicators.

The MACD charts also threw up bearish crossovers at 64 counters on the NSE, which analysts tend to read as a ‘sell’ signal. These included IDFC Bank, Wipro, Sintex, Vijaya Bank, GSFC, Tata Teleservices (Maharashtra), Ruchi Soya, Capital First, Max India and Purvankara.

MACD crossed below signal - March 26


On Monday, the 50-share Nifty index settled up 132.60 points, or 1.33 per cent, from its previous close at 10,130.65.

“The daily price movement formed sizeable bullish candle and covered almost past two sessions losses. On the hourly chart, the index is approaching towards immediate resistance zone of 10,150. However, any sustainable move above this will cause the index to scale towards 10,200-10,250 levels,” said Rajesh Palviya, Head-Technical & Derivatives Analyst, Axis Securities.

“On the downside, an immediate intra-day support is 10,080. Hence, buying may emerge on correction towards this support zone. The positive crossover from the oversold zone on the daily strength indicator RSI and the momentum indicator- Stochastic will also support the further short-term upside momentum to continue,” said Palviya.

Understanding MACD

STATE BANK OF INDIA

A close look at the chart of State Bank of India (SBI) shows whenever the MACD line has gone beyond the signal line, the stock has mostly shown an upward momentum and the vice versa.

Shares of SBI closed 5.28 per cent up at Rs 247.20 on March 26.

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