The momentum indicator has signaled bearish crossovers on these stocks — a sign of bearish undertone — hinting at possible downsides in the days ahead.
The list includes Axis Bank, Jindal Steel & Power, Ujjivan SFB, Bharat Forge, Bank of Maharashtra, Hindustan Copper, BEML, DB Realty and Karda Constructions.
MACD is known for signaling 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 18 stocks were showing bullish trends. They included Aegis Logistics, UPL, Cipla, LT Foods, Navkar Corporation, Orient Cement, Apollo Hospitals, Max Financial Services JK Lakshmi Cement and LUX Industries, among others.
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 Thursday, the index was trading at 18,097.05, down 113.90 points or 0.63 per cent.
‘The range of 18,100-18,000 is a key support for Nifty50. As of now, we do not see any indication of Nifty50 breaching this important support zone on the expiry day itself but it may happen sooner or later. On the higher side, 18,350-18,400 remains a sturdy wall,” said Sameet Chavan of Angel Broking.
Understanding MACD
A close look at the stock chart of Axis Bank shows whenever the MACD line has breached above the signal line, the stock has shown an uptrend and vice versa.
