Hindalco, Sun Pharma, Suzlon among 38 stocks that look set to rally, shows MACD

Source: economictimes.indiatimes.com

NEW DELHI: The domestic stock market looked directionless on Tuesday, but at least 38 NSE-listed stocks are high on momentum.

They looked strong on the technical charts, as suggested by moving average convergence divergence, or MACD, even as the broader market showed no signs of a rebound.

The momentum indicator signalled a bullish crossover, hinting at possible upsides.

Many of these stocks have been witnessing strong trading volumes of late, lending credence to the emerging trend. The list included SuzlonNSE 13.46 % Energy, Hindalco, NTPC, Sun Pharma, NCC, Escorts, Petronet LNG, Marksans Pharma and Igarashi Motors. TBZ, Spencer’s Retail, Oberoi Realty, HathwayNSE 0.84 % Cable and L&T Technology Services have also sent out bullish signals on the technical charts, data showed

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.

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 believe Nifty needs to breach the 11,625-11,850 range to show any decisive trend. On Tuesday, the NSE barometer hit a low of 11,651. Nifty movement in last two sessions was limited inside a long bullish candle, whose range lies in the 11,843-635 band, registered on June 20.

Unless the low of 11,625 is decisively breached on the downside, weak movement of the last two sessions can still be read as a consolidation move in nature, said Mazhar Mohammad of Chartviewindia.in

“Nevertheless, a decisive close below 11,625 can set the tone for a fresh breakdown, which may then drag the indices into the euphoric gap zone between 11,591 and 11,426 levels while the market may show strength on the upside only on a close above 11,843 level. As the market appears to be directionless, traders should remain neutral for time being,” Mohammad said.

Understanding MACD
A close look at the stock chart of Hindalco shows whenever the MACD line has breached above the signal line, the stock has shown upward momentum and vice versa. On Tuesday, the scrip traded 0.05 per cent lower at Rs 198.10 on NSE.