In total, the momentum indicator has signaled bearish crossovers on 14 stocks — a sign of bearish undertone — hinting at possible downsides in the days ahead.
The list includes largecaps such as AMCs UTI AMC and
, life insurer ICICI Prudential Life, BSE100 constituent Bajaj Holdings, telecom major Bharti Airtel and electric utility company Power Grid.
Midcap and smallcap stocks such as Repro India, Tasty Bite, Union, KPIT Technologies, Vinyl Chemicals and Elecon Engineering are some other stocks sending bearish signals.
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 13 stocks are showing bullish trends. They included Cipla, GAIL, Info Edge,
, The New India Assurance, Torrent Pharma and ITDC, 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 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 was trading near 16,550.
“We now have a defined Nifty50 range at 16,400-16,600. Only a sustainable move outside the range would decide the immediate trend for the market. If we have to regain any kind of strength, the banking index needs to lift its spirit. Apart from this, the broader market continues to sulk, which certainly does not bode well for the traders. As of now, it’s advisable to stay light and try to pick the right proposition for momentum trading,” said Sameet Chavan of Angel Broking.
A close look at the stock chart of Bharti Airtel shows whenever the MACD line has breached above the signal line, the stock has shown an uptrend and vice versa.