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Strong momentum setting in on these midcaps & smallcaps, suggests MACD

As many as 88 such stocks look strong on the technical charts and might be heading higher.

ETMarkets.com|
Updated: Oct 29, 2019, 02.01 PM IST
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NEW DELHI: Benchmark indices have now advanced in eight of last 10 sessions, setting up a strong momentum in many midcap and smallcap stocks.

As many as 88 such stocks look strong on the technical charts and might be heading higher in the coming days, suggests moving average convergence divergence or MACD.

The momentum indicator signalled 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 Dhanlaxmi Bank, IDBI Bank, TV18 Broadcast, Nalco, Future Consumer and OnMobile Global.

Among others are Balaji Telefilms, Sudarshan Chemicals, CDSL, Himadri Specialty Chemical, Gujarat Pipavav Port, JM Financial, Pennar Industries and Shalby.

88 up 1
Up 88 2

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 14 stocks are showing bearish trends. They included Biocon, Berger Paints, Mahindra Holidays, GSPL, Info Edge and DCM Shriram.

Down 14 1

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 using a single valuation ratio.

As for Nifty50, Sameet Chavan of Angel Broking said one may remain upbeat as long as the recent swing low of 11,090 is intact, even though follow-up move is missing despite last week’s Nifty breakout from an ‘Inverse Head and Shoulders’ pattern.

“The 11,450–11,350 range can be seen as immediate support. We could see the rally extending towards 11,850 – 11,900 zone or may be beyond 12,000 once Nifty50 manages to sustain above 11,700. The Bankex has been a laggard of late, which needs to step up. We expect it to happen soon,” the brokerage said.

The index has now closed within the supply zone of 11,706 to 11,582, suggesting that the market is circumspect at current level, said Arihant Capital. “Stock-specific activity is likely to continue,” it said.

Understanding MACD
IDBI snip

A close look at the stock chart of IDBI Bank 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 0.97 per cent higher at Rs 31.20 on NSE.

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