NEW DELHI: Many largecap stocks including Reliance Industries, , , , IOC and are among 115 stocks that are looking strong on momentum oscillator MACD, or moving average convergence divergence, after the recent selloff.
The momentum indicator signalled bullish crossovers — a sign of bullish undertone — on these counters, hinting at possible upsides for these counters in the days ahead.
The list included Vodafone Idea,
, SBI, Reliance Industries, IOC, Bajaj Finance, Hathway, Cable, Delta Corp, PFC and LIC Housing. Many of these stocks gained up to 4 per cent in morning trade on Tuesday.
TVS Motor, Vedanta, CDSL, IOC, Indian Bank, Suzlon Energy and Geojit Financial Services are some of the other stocks that looked strong on the MACD indicator. They have gained up to 12 per cent so far.
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Vi, SBI, Tata Steel and Vedanta are among the 15 stocks on the list.
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 five stocks are showing bearish trends: Bajaj Consumer Care, Sobha, Neuland Labs, Cigniti Technologies and Timken India.
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Bajaj Consumer and Sobha were among the five stocks on the list.
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 the 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, one 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.
SAIL, Axis Bank among 7 stocks that may help make good money within weeks
Money-making ideas
As Covid caseload is rising non-stop, the market has also been under intense selling pressure. Many stocks are now trading far below their 52-week highs. But that doesn’t mean you can not make money on Dalal Street. “Despite the weak market trend, vaccine drive and lockdown are invoking hopes of economic recovery in the near future. Movement will be stock-specific based on Q4 results and dictated by developments on the Covid spread, like falling infection rate,” said Vinod Nair, Head of Research at Geojit Financial Services.
Here are 7 stocks that analysts believe may deliver strong returns in the next few weeks:
Aarti Industries | BUY | Target: Rs 1,495
Since the market is not clear with its short term direction, this stock can be a safe haven for market participants. On the daily chart, one can see a series of ‘Higher Highs Higher Lows’. On Friday, Aarti Industries witnessed good traction in the counter; suggesting continuation of the upward trajectory. The analyst recommends going long for a target of Rs 1,495 in the coming days. A strict stop loss can be placed at Rs 1,390.
A continuous drift in the stock’s price can be seen in between brief pauses. The selling momentum seems to have reinforced in the last few days as the stock started falling like a bottomless pit. Since Escorts is trading convincingly below the sacrosanct support zone of its 200-day SMA along with the weekly chart exhibiting a bearish ‘Head And Shoulder’ pattern, the analyst expects the downward move to extend further. One can look to sell for a target of Rs 1,270. Maintain a strict stop loss at Rs 1,184.
The medium term texture of SAIL is very strong and a higher bottom formation on the daily and weekly charts indicates a strong possibility of another uptrend wave. Strong bullish candle on weekly charts along with modest volume activity advocates further uptrend. Unless it trades below Rs 89, positional traders can retain an optimistic stance and look for a target of Rs 100. Fresh buying can be considered now and on dips between Rs 93 and Rs 91. The analyst has a stop loss at Rs 89.
On daily charts, SBI Life has formed a higher bottom formation post short term price correction. Currently, the stock is trading in the Rs 900-940 range. Strong bullish candle formation on weekly and daily charts suggest that the stocks is in strong hands and further uptrend cannot ruled out above Rs 890, which should be a stop loss as well, according to the analyst. In addition, after a long time the stock has managed to close above Rs 920 mark along with incremental volumes which indicates high chances of fresh uptrend wave from current levels.
On Tuesday, the Nifty50 traded near the 14,550 level.
“With the pullback in last three trading sessions, Nifty has approached its 20-day EMA at 14,570, which is a crucial short-term barrier. A move above this will add some momentum and take Nifty towards its next resistance levels at 14,650 (hourly 200-day SMA) and 14,750, which is the trendline resistance arrived at by joining the recent swing highs of this corrective phase,” said Sameet Chavan of Angel Broking.
“On the flip side, the 14,380 and 14,270 levels would be seen as immediate supports. With these levels on the tab, traders can look at stock-specific ideas where better opportunities can be seen,” Chavan said.
Shrikant Chouhan of Kotak Securities said the texture of the reversal pattern suggests further uptrend cannot ruled out, if Nifty manages to trade above 14,535 level.
“Above the same, we can expect continuation of the uptrend wave up to the 14,600-14,625 zone. On the flip side, if Nifty trades below 14,410 level, that may open one more leg of correction towards 14,300 level,” he said.
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The MACD indicator should not be seen in isolation.
Understanding MACD
A close look at the stock chart of Reliance Industries shows whenever the MACD line has breached above the signal line, the stock has shown an uptrend and vice versa.
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