The momentum indicator signalled bullish crossovers — a sign of bullish undertone — on 29 counters, hinting at possible upsides in the days ahead. The list included Ajanta Pharma, Dilip Buildcon, MCX, JB Chemicals, Sadbhav Engineering and ABB India. These stocks gained up to 2 per cent so far on Tuesday.
Take Solutions, Inox Wind, Advanced Enzyme, Whirlpool of India, Heritage Foods, Insecticides, TVS Srichakra and Lovable Lingerie are some other stocks, which look strong on the MACD indicator. These stocks went up to 18 per cent higher so far.
ETMarkets.comStocks that look bullish on the MACD chart
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 indicate ‘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 21 stocks are showing bearish trends. They included Tata Steel, Biocon, Asian Paints, Dr Lal Pathlabs, Hindustan Unilever, Britannia Industries, Nestle India and Shree Cement.
ETMarkets.comStocks that are giving bearish signals on the MACD chart
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.
This is because MACD is a trend-following indicator. Though traders can increase the sensitivity of MACD by using shorter moving averages for computing MACD (e.g. 5-day and 12-day moving averages), the lag effect will still be there. Hence, 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.
On Tuesday, Nifty50 was trading above the 14,400 level.
“Levels of 14,450, 14,500 and 14,560 are intraday hurdles for Nifty50 whereas 14,300 followed by 14,200 are key supports,” said Sameet Chavan of Angel Broking.
“If the Nifty50 moves above the resistance at 14,400, expect the market to move higher towards 14,600-14,615. A crucial support is at 14,250. A break below this could be a bearish development and a signal of a possible drop to 13,900,” said independent analyst Manish Shah.
Choice Broking said that the hourly momentum indicator Stochastic had bounced from oversold zone with a positive crossover, which suggested strength. “Nifty has an immediate support at 14,150 levels while it may find resistance around 14,500 level,” the brokerage said.
Understanding MACD
ETMarkets.comA close look at the stock chart of Ajanta Pharma shows whenever the MACD line has breached above the signal line, the stock has shown uptrend and vice versa.
