The momentum indicator has signalled bullish crossovers on 17 stocks — a sign of bullish undertone — hinting at possible upsides in the days ahead.
The list included Adani Power and Adani Green Energy. Oil and gas sector stocks ONGC and Gujarat Gas, drug maker Biocon, utility CESC, IT stock Mphasis and hotel stock Advani Hotels were some of the stocks sending bullish signals. These stocks rose up to 3 per cent in Wednesday’s trade.
Mishra Dhatu, GTPL Hathway, Sundaram Clayton and Kalyani Forge were some other stocks showing bullish bias.
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 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.
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 Wednesday, the Nifty50 saw strong selling pressure near 17,450. It was later trading below 17,250 level. The index was trading below its 50-day moving average. Analysts see strong support for the index at 17,000 around which the 200-day moving average is placed for the index.
A close look at the stock chart of Adani Power shows whenever the MACD line has breached above the signal line, the stock has shown an uptrend and vice versa.