NEW DELHI: Even as benchmark indices hit fresh all-time highs in Tuesday’s trade, over three dozen stocks have been sending ‘sell’ signals on NSE, according to MACD or moving average convergence divergence.
The momentum indicator signaled bearish crossovers on 40 stocks—a sign of bearish undertone—hinting at possible downsides in the days ahead.
The list included four Nifty50 names
, Larsen & Toubro, HeroMoto Corp and Maruti Suzuki.
It also included Adani Group stocks such as and Adani Total Gas and banks such as Central Bank, , and CSB Bank.
, JB Chemicals and Shoppers Stop were other stocks that are sending bearish signals on the MACD indicator.
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 33 stocks are showing bullish trends. They included Rain Industries, Usha Martin, Zee Media, Marico, Balmer Lawrie and Surya Roshni, 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 impact will nonetheless 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 briefly hit the 15,900 level. It was later seen holding near that level.
“If the benchmark has to test the levels of 16,000, the underperforming banking space has to participate. If the Bank Nifty manages to break above 35,350, we may see a bounceback move in the banking space that can fuel the next leg of the rally for Nifty50,” he said.
The banking index hit a high of 35,283.65 so far on Tuesday.
A close look at the stock chart of Adani Enterprises shows whenever the MACD line has breached above the signal line, the stock has shown an uptrend and vice versa.
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