Rakesh Jhunjhunwala portfolio: 2 Jhunjhunwala stocks, RIL & Bajaj Finance among 28 counters sending buy signals

NEW DELHI: Despite a weaker trend in the broader market, over two dozen stocks are sending buy signals on MACD or moving average convergence divergence charts.

The momentum indicator signaled bullish crossovers on 28 stocks — a sign of bullish undertone — hinting at possible upsides in the days ahead.

The list includes Fortis Healthcare, where ace investor Rakesh Jhunjhunwala held 4.31 per cent stake as of June 30. Another Jhunjhunwala stock Delta Corp, where the seasoned investor owns 7.5 per cent stake, is also sending a buy signal on the momentum indicator. Reliance Industries, Bajaj Finance, ICICI Lombard, Tata Elxsi, Mindtree, Aster DM Healthcare, Spencer’s Retail, Apollo Hospitals, Vaishali Pharma, Arvind Fashions and Vikas WSP are some of the other stocks sending bullish signals. These stocks were trading up to 14 per cent higher in Tuesday’s trade.

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 14 stocks are showing bearish trends. They included Tata Power, SBI Card, Info Edge, KEI Industries, Apollo Pipes, Trident and Golden Tobacco, 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 Tuesday, the Nifty50 was trading almost flat at 16,556.3o.

“The immediate supports for Nifty50 are placed around 16,460 and 16,400 while levels around 16,600 and 16,700 will be considered as immediate resistances. Since there are no reversal signs on the index, one should avoid taking contra calls and rather be very selective in picking stocks for trading. Traders should avoid leveraged positions and also book timely profits on long positions,” said Samit Chavan of Angel Broking.

ICICI Securities said that bouts of volatility at higher levels after a recent strong run-up would offer incremental buying opportunity, as buying on declines strategy has worked well over the past 15 months.

Understanding MACD

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