New Delhi: With Union Budget 2019 just a few days away, a total of 126 stocks including blue clips like HDFC, Bajaj Auto and Bajaj Finance are showing strong trend on the technical charts, as suggested by moving average convergence divergence, or MACD.
The momentum indicator signalled a bullish crossover on these counters, hinting at possible upsides. Many of these stocks are from consumer sectors, as analysts are hoping for some booster dose from Finance Minister Nirmala Sitharaman to address farm distress and the economic slowdown. A few battered stocks also looked firm on the charts.
Strong trading volumes in many of these counters are lending credence to the emerging trend. The list included stocks like Dabur India, HDFC Bank, Exide, Bajaj Finance, JSW Energy, Bajaj Auto, UCO BankNSE 2.76 %, PVR and HDFC Life Insurance.
Sintex Plastics, SiemensNSE 0.35 %, Deepak Nitrate, Religare Enterprises, Usha Martin and JP Associates are among other stocks sending out bullish signals.
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.
Data showed 17 stocks on NSE are signalling a bearish trend. They included Oil IndiaNSE 1.08 %, Ambuja CementsNSE 0.00 %, Muthoot FinanceNSE -0.20 %, NCC, Mahanagar Gas, DCB Bank and Shriram Transport Finance.
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.
Analysts expect Nifty50 to try and reclaim the 12,000 mark by the Union Budget. On Tuesday, the index climbed near the 11,900 mark in early trade before giving up the entire gains. At 9.30 am on Tuesday, the index was testing the 11,850 level.
Analysts said Nifty has to move above 11,911 in order to be able to rally further.
Sameet Chavan of Angel Broking said Nifty is facing a challenge in the 11,890-11,911 range, but expects it to take out this level soon. “The kind of broadbased participation we are witnessing, the 12,000 mark seems very much on the cards, maybe ahead or on the day of Budget,” he said.
Adopt a buy-on-dips approach for now, said Rohit Singre of LKP Securities. “Nifty has broken out of the double-bottom formation on the daily chart and Bank Nifty has broken out of the bullish flag. Use any dip as a buying opportunity,” he said.
A close look at the stock chart of JSW Energy shows whenever the MACD line has breached above the signal line, the stock has shown an upward momentum and vice versa. On Tuesday, the scrip rose 1.24 per cent to Rs 69.45.