Rel Capital, Edelweiss among 38 stocks that look ready to rally, suggests MACD

NEW DELHI: While the benchmark equity indices have slipped in last eight straight sessions to log their longest losing streak in six years, a host of midcap and smallcap stocks look set to rally in the coming days. Or that is what the momentum indicator moving average convergence divergence, or MACD, is suggesting.

This, at a time when a bunch of largecap stocks are looking weary on the technical charts. Data showed some 38 stocks have showed an upward bias on NSE.

Technical indicator MACD has signalled an upward crossover, meaning a bullish signal, on these counters. This, coupled with the fact that many of these stocks have also been witnessing strong trading volumes of late, is adding credibility to the emerging trend.


The list included NTPC, Power Finance Corporation, Reliance Capital, Edelweiss Financial Services and Indiabulls Housing Finance.

The list also included real estate firms Delta Corp and Prestige Estates and others like Adani Transmission, Dolphin Offshore, Asahi India Glass, Linde India and IFB Industries.

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 reflect ‘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.

Meanwhile, 53 stocks showed bearish crossovers on the charts. The list included largecaps such as ITC, TCS, HDFC Bank, Titan and Hero MotoCorp. All these stocks are a part of Nifty50.

SJVN, Divi’s Labs, Kansai Nerolac and MEP Infra are among other stocks looking weak on technical charts.

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.

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.

As far as Nifty50 is concerned, all eyes are now on the 10,580 level.

“The market looks extremely depressed and, hence, every minor bounce is getting sold into. We are approaching a major swing low of 10,580 that the Nifty50 made on January 29. It is likely to act as a ‘make or break’ level for the index in the near term. As long as Nifty50 manages to defend it, there is some ray of hope for the bulls,” said Sameet Chavan of Angel Broking.

The expansion in the daily Bollinger Bands suggests the market may witness accelerated selling once the support zone of 10,610-105,83 is breached on a closing basis, said Gaurav Ratnaparkhi, Senior Technical Analyst at Sharekhan. The index is likely to face resistance in the 10,700-10,750 zone.

UNDERSTANDING MACD

A close look at the stock chart of NTPC showed whenever the MACD line has breached above the signal line, the stock has showed a upward momentum and vice versa. On Tuesday, the scrip traded 1.27 per cent lower at Rs 135 on BSE.