D-Street bulls struggle but 16 stocks send buy signals on MACD indicator
Data showed 25 stocks were still showing bearish trends. They included Greaves Cotton, Mirza International, Time Technoplast, Religare Enterprises, KEI International and TCI Express.
NEW DELHI: Benchmark indices struggled to hold on to morning gains on Tuesday but over a dozen stocks were still sending buy signals on the moving average convergence divergence (MACD).
The momentum indicator has signalled bullish crossovers on 16 stocks — a sign of bullish undertone — hinting at possible upsides in the days ahead. The list included HCL Technologies, Cadila Healthcare, Godrej Consumer Products, APL Apollo Tubes and Jain Irrigation. Aurionpro Solutions, Alkali Metals, ARSS Infrastructure, Atul and Geekay Wires were some of the other stocks sending buy signals on the MACD. 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 goes 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 25 stocks were still showing bearish trends. They included Greaves Cotton, Mirza International, Time Technoplast, Religare Enterprises, KEI International and TCI Express. 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 the MACD by using shorter moving averages (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 17,079.20, up 25 points. The index hit a day's high of 17,324.65.
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"Till the Nifty50 does not move beyond 17,600, it is not out of the woods. On the flipside, yesterday’s low around 16,800 would be seen as a key support. Traders should avoid getting carried away by rebounds, as we expect the continuation of the corrective move for a while," said Sameet Chavan of Angel Broking.
Understanding MACDA close look at the stock chart of Cadila Healthcare shows whenever the MACD line has breached above the signal line, the stock has shown an uptrend and vice versa.
