Technical View: Britannia, IndusInd Bank, 20 other stocks may rise in coming days; here's why

6 days ago 9

NEW DELHI: As benchmark indices untiredly scale new highs, many stocks on NSE are showing signs of strength, and no signs of abating as yet.

About 22 of them look poised to gain in the coming days, as suggested by the moving average convergence divergence (MACD), a momentum indicator.

The momentum indicator signalled bullish crossovers — a sign of bullish undertone — hinting at possible upsides for the stocks in the days ahead. The list included stocks such as Britannia, Adani Ports & SEZ, IndusInd Bank, Tata Chemicals and IDBI Bank.

Canara Bank, ITI, Majesco, DB Corp, EID Parry Honda India Power and Sundaram Brake Lining are among other stocks in the list.

Many of these stocks were trading higher on Wednesday. ITI was quoting 5.34 per cent higher at Rs 135.20. Adani Ports was up 2.3 per cent at Rs 523, Majesco gained 5 per cent to Rs 23.70 and Tata Chemicals added 2.4 per cent to Rs 535.

The MACD indicator 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 61 stocks are showing bearish trends. They included SAIL, Motherson Sumi, GMR Infra, Varun Beverages, Bharat Dynamics, Strides Pharma Rolta India and Pidilite Industries, among others.

MACD 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 buy or sell recommendations 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 topped 14,600 on firm global cues. At 10:45 am, it quoted at 14,604.05, up 40.60 points or 0.28 per cent.

"Barring a couple of days breather in the previous week, the markets continued its merry run in the new calendar year as well. Almost every day in the first half, the market gives small corrections and that decline is getting bought into comfortably by the bulls. Honestly, we have not seen this kind of optimism over the past decade or so and hence, it’s becoming difficult to ride this move now," said Sameet Chavan of Angel Broking.

"The 14,600 is the next level to watch for. Immediate support is seen at the 14,500-14,430 range," he added.

Even though Nifty is placed at the high, there is no indication of any trend reversal in the market, said Nagaraj Shetti, Technical Research Analyst at HDFC Securities.

“The symmetrical pattern of upmove/time consumption in the last 16-18 sessions before a day’s sharp weakness remains intact. After the drop of the last one day on December 21, 15 sessions have already been consumed. Hence, 2-3 sessions from here on are going to be crucial and one can expect sharp profit booking from the highs,” he added.

Understanding MACD



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 an uptrend, and vice versa.

Read Entire Article