Finace And Stock

Adani Enterprises, BPCL, 80 other stocks sending out buy signals on MACD indicator

NEW DELHI: Despite the overnight fall in key US indices, domestic stocks are holding up well in Tuesday’s trade, with 82 stocks generating ‘buy’ signals on MACD or moving average convergence divergence.

The momentum indicator has signaled bullish crossovers on these stocks — a sign of bullish undertone — hinting at possible upsides in the days ahead.

The list includes Rail Vilas Nigam, Deepak Nitrite, BPCL, Infibeam Avenues, Nippon Life AMC,

and Fortis Healthcare. Morepen Labs, Garden Reach Shipbuilders, CEAT, Gland Pharma, PNG Housing, Venky’s India and CreditAccess Grameen are some other stocks that have sent bullish signals.

MACD is known for signaling 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 13 stocks were showing bearish trends. They included ZEE Entertainment, Cipla, Petronet LNG, Reliance Capital, Apollo Tyres, Tata Elxsi and Century Textiles, among others.

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 Tuesday, the index was trading at 17,686.35, down 0.03 per cent.

Gaurav Ratnaparkhi of Sharekhan said the index is nicely respecting Fibonacci retracements on both the sides. “This underscores the fact that the index is in a short term consolidation phase. On the downside, the gap area of 17,581-17,557 will act as a support zone for Nifty50. The medium-term trend continues to be positive as the index is holding on to the lower end of a multi-month rising channel,” he said.

If Nifty50 fails to continue this momentum and again breaks below 17,600-17,550, the bears will be back in action, said Sameet Chavan of Angel One.

“We continue to remain on the cautious side and advise against creating aggressive bets for a while,” he said.

Understanding MACD

A close look at the stock chart of Deepak Nitrite shows whenever the MACD line has breached above the signal line, the stock has shown an uptrend and vice versa.

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