Infosys, HUL and TechM among 150 stocks sending buy signals on MACD

NEW DELHI: Even as Nifty50 was trading lower in Tuesday’s trade, as many as 150 NSE listed stocks, including Infosys, Hindustan Unilever (HUL) and Tech Mahindra (TechM), were sending ‘buy’ signals on MACD or moving average convergence divergence chart.

The momentum indicator has signaled bullish crossovers on such stocks — a sign of bullish undertone — hinting at possible upsides in the days ahead.

Fortis Healthcare, Delta Corp, Mindtree, Wockhardt, Parag Milks, Trent and PVR were some other stocks sending out bullish signals on the technical indicator.

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 six stocks were showing bearish trends. They included Sterling & Wilson, HG Infra Engineering, Alkali Metals, P&G Hygiene, Remsons Industries and Gujarat Apollo Industries.

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, the Nifty50 was trading at 18,018.25, down 50 points.

“Traders are advised not to carry aggressively bets on the long side as long as Nifty50 remains below 18,000-18,100 on a closing basis. On the flipside, the index may see this corrective move extending towards 17,450 first and 17,200-17,000 later, if things get worsened. This week would be quite crucial for the market as it may dictate the near term direction,” said Sameet Chavan of Angel Broking.

Understanding MACD

A close look at the stock chart of Birlasoft shows whenever the MACD line has breached above the Signal Line, the stock has shown an uptrend and vice versa.