In total, the momentum indicator has signalled bullish crossovers on 80 stocks — a sign of bullish undertone — hinting at possible upsides in the days ahead.
The names included metals and mining stocks such as Coal India, SAIL, Tata Steel, Nalco, Vedanta, Tata Steel, Jindal Steel & Power and Hindustan Zinc, among others. Tata Metaliks, Kalyani Steel, Tata Steel Long, Indian Metals & Ferro Alloys, Sarda Energy & Minerals and Madhav Copper were the others.
Shares of oil and gas and power sector companies such as GAIL, Petronet LNG, Power Grid, Torrent Power and Godawari Power and Ispat were some other stocks sending positive signals on MACD. This list also included Escorts, Religare Enterprises, Varun Beverages, HAL, Future Enterprises and Happiest Minds.
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 only 4 stocks were sending bearish trends. They were Jindal Photo, P&G Hygiene and Health, Crest Ventures and Debock Industries.
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 Wednesday, the Nifty50 was trading below 16,600.
“The range of 16,400-16,500 is the immediate support zone and any sustenance above the same could be seen as a positive sign for the market,” said Sameet Chavan of Angel One.
Shrikant Chouhan of Kotak Securities said that the dismissal of 16,500 could possibly trigger one more correction wave till 16,350-16,200. He sees resistance for the index at 16,800.
Understanding MACD
A close look at the stock chart of Coal India shows whenever the MACD line has breached above the signal line, the stock has shown an uptrend and vice versa.
