India Finance News

ITC poised for rally but trends weaken in HDFC duo, TechM, suggests MACD

NEW DELHI: Benchmark indices are consolidating near record high levels, with a few blue chips such as the HDFC duo and Tech Mahindra are showing signs of fatigue.

But at least 46 other stocks on Dalal Street still look solid on the technical charts, suggests moving average convergence divergence or MACD.

The stocks have formed a bullish crossover on the momentum indicator, hinting at possible upsides. Strong trading volumes on many of these counters are adding credence to the emerging trend.

The list included ITC, which was up at half a per cent at Rs 239 as of Tuesday’s close. Oil India, Lupin, NBCC, Natco Pharma, Tejas Networks, GSPL, Varun Beverages, Skipper, Oberoi Realty, TCNS Clothing and V-Guard Industries are among other stocks that have witnessed bullish crossovers on their respective technical charts.

The 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 reflect ‘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 15 stocks are showing bearish trends. They included HDFC Bank, HDFC, Tech Mahindra, SBI Life Insurance, Crisil, JK Paper and Repco Home Finance.

Analysts said there may be better opportunities outside the Nifty pack in the coming days. “Nifty Midcap outperformed Nifty on Monday and this outperformance is likely to continue in the near term. Hence, traders are advised to focus on specific stocks, names that are signaling up-moves. For Nifty, one should have a ‘buy on dip’ strategy with supports placed in the 12,200-12,210 range whereas 12,300 and 12,360 levels can be the immediate targets,” said Sameet Chavan of Angel Broking.

Chandan Taparia of Motilal Oswal Securities said the overall trend of the market remains positive. He also suggested a ‘buy on dips’ strategy as long as the index holds above 12,150 level. Taparia sees downside support for Nifty at 12,200.

Understanding MACD

A close look at the stock chart of ITC shows whenever the MACD line has breached above the signal line, the stock has shown an upward momentum and vice versa.

Source: Economic Times

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