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The momentum is building up on the 50-pack index and, going by the moving average convergence divergence or MACD, a few stocks look poised to rally in the coming days.
The momentum indicator formed a bullish crossover on 42 counters on NSE, hinting at possible upsides for these stocks. Strong trading volumes on many of these counters lent credence to the emerging trend.
The list included shares of steelmakers, banks, housing financiers and pharma firms.
Among them are metal stocks Jindal Steel, Tata Steel and Tata Steel-BSL and housing finance stocks HDFC and LIC Housing Finance.
Bank stocks such as Axis Bank and DCB Bank, NBFCs Equitas Holdings, L&T Finance and Aditya Birla Money, aviation player InterGlobe Aviation and drugmakers Divi’s Labs and Eris Lifesciences also featured on the list.
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 33 stocks are showing bearish trends at the moment. They included REC, Indiabulls Real Estate, Rites, MSTC, Max India, SRF, Affle India, KNR Constructions and Polycab India.
Analysts said 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.
As for Nifty50, Manav Chopra, of Indiabulls Ventures said it has gathered momentum to hit fresh all-time highs and the rally looks sustainable as the participation is wider. “In the near term, the 12,000 level is likely to act as near-term support,” he said.
On Tuesday, the index hit a fresh record high of 12,120 in early trade and traded above 20-day, 50-day and 100 -day simple moving averages, indicating a positive bias.
“Buying on dips continues to be our preferred strategy. Daily strength indicator RSI is moving upwards and above its reference line, indicating a positive bias. That said, momentum oscillator Stochastic still remains bearish, indicating possible consolidation,” said Rajesh Palviya of Axis Securities.
Understanding MACD
A close look at the stock chart of HDFC shows whenever the MACD line has breached above the signal line, the stock has shown a upward momentum and vice versa. On Tuesday, the scrip rose 0.63 per cent to Rs 2,308 on NSE.
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