The momentum indicator signalled bullish crossovers — a sign of bullish undertone — on these counters, hinting at possible upsides in the days ahead. These stocks were mainly of two-wheeler makers, gold loan finance companies, chemical producers, drug makers and auto ancillary firms, among others.
The list included chemical stocks such as Himadri Specialty, Tata Chemicals, Meghmani Organics and Bodal Chemicals. Two-wheeler stocks Hero MotoCorp, TVS Motors and Eicher Motors (Royal Enfield) and auto ancillary stocks such as Apollo Tyres and Exide Industries are also observing bullish trends. Cement stocks ACC and UltraTech Cement, gold loan companies Manappuram Finance and Muthoot Finance, pharma major Biocon and construction and engineering major Larsen & Toubro are among other stocks in the list.
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 four stocks are showing bearish trends. They are Manaksia Steels, Panacea Biotec, Hester Biosciences and Bhagyanagar India.
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 Nifty50 topped 11,300 mark in trade, before retracing a bit. Analysts said it was a crucial short-term hurdle.
“The 11,300 is coinciding with the 62 per cent retracement level of the last leg of fall from the interim top of 11,618-10,790 levels. In case the bulls manage a strong sustainable close above the said hurdle, the upswing shall get expanded further towards 11,410 levels,” said Mazhar Mohammad of Chartviewindia.in.
Sameet Chavan of Angel Broking, in fact, advised traders not to get carried away as we can still see some selling pressure at higher levels. “For Tuesday, the support is visible at 11,175-11,100 levels,” he said.
A close look at the stock chart of Tata Chemicals shows whenever the MACD line has breached above the signal line, the stock has shown uptrend and vice versa. On Tuesday, the scrip was trading 0.69 per cent higher at Rs 299.45 on NSE.