In total, the momentum indicator has signaled bullish crossovers on 33 stocks—a sign of bullish undertone—hinting at possible upsides in the days ahead.
Other than Power Grid, Vedanta and Tata Motors, the list includes Tata Chemicals, IT firm
, auto component makers Gabriel India and Minda Industries, specialty chemicals maker and wire rope maker Usha Martin.
ETMarkets.comMax Ventures, Dalmia Bharat Sugar, , Manglam Cement, and Nilkamal are some other stocks sending bullish signals on MACD.
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 20 stocks were showing bearish trends. They included BPCL, Wipro, Max Healthcare, Ambuja Cements, Aster DM Healthcare, GCPL, Trent and JK
, among others.
ETMarkets.comThe 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 Wednesday, the Nifty50 was trading above 17,550.
“The trend is extremely strong but the current move is not giving us comfort at all. We reiterate that when things start to look hunky dory and there are no signs of correction, market surprises. Yes, it’s difficult to predict the precise time, but it’s always better safe than sorry. As of now, we are not advising to short, but at least one can choose to keep booking profits on a regular interval and stay light on positions,” said Sameet Chavan of Angel Broking.
Understanding MACD
A close look at the stock chart of Power Grid shows whenever the MACD line has breached above the signal line, the stock has shown an uptrend and vice versa.
ETMarkets.com
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