The momentum indicator signalled bullish crossovers — a sign of bullish undertone — on 65 counters, hinting at possible upsides in the days ahead. The list included stocks like Tata Steel, Axis Bank, BPCL, NMDC and Hindustan Zinc, among others.
Adani Ports & SEZ, Escorts, Rail Vikas Nigam, National Fertilizers, Voltas, RBL Bank, LIC Housing Finance, L&T Finance, NCC, Reliance Infra, Manappuram Finance and PVR are among some of the other stocks on the list.
Many of these stocks traded higher in Tuesday’s trade. Rail Vikas Nigam traded 5.2 per cent higher at Rs 25.30. National Fertilizers advanced 7.65 per cent to Rs 40.80. Axis Bank and RBL Bank were up 2 per cent each.
The 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 34 stocks are showing bearish trends. They included MTNL, Bombay Dyeing, Godrej Agrovet, Eris Lifesciences, Sundaram Finance and Vesuvius India, 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, Nifty50 slipped below 14,100 on weak global cues. It last traded at 14,086, down 46.15 points or 0.33 per cent.
The immediate support for the index is placed at 14,060 level, said Nagaraj Shetti, Technical Research Analyst at HDFC Securities, who sees resistance for the index at 14,350.
“Nifty’s short-term trend continues to be positive. A further sustainable upmove from here could mean an upside breakout of the small high-low range for the index and that could result in some more upside in the near term,” he said.
Ruchit Jain of Angel Broking said it is definitely not advisable to take any contrarian calls in anticipation of any trend reversal, as the market is in a strong uptrend.
“Traders should prefer to book timely profits on existing positions and tighten the risk management part of the trade. The immediate support for the Nifty is placed at 13,950 and now becomes a sacrosanct for this leg of upmove,” he said.
A close look at the stock chart of Rail Vikas Nigam shows whenever the MACD line has breached above the signal line, the stock has shown uptrend and vice versa.