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NEW DELHI: As the market has taken a breather after a sharp fall, over 200 stocks on NSE, mostly midcap and smallcaps, were sending ‘buy’ signals on MACD or moving average convergence divergence on Monday.

In total, the momentum indicator has signalled bullish crossovers on 215 stocks — a sign of a bullish undertone — hinting at possible upsides in the days ahead.

The list included utility companies like

, Tata Power, banks like , Axis Bank, Karur Vysya Bank; IT majors such as Wipro, Infosys and that saw a massive rally on Friday last week.

Among others on the list are DLF, India Energy Exchange, , , , , , , and .

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.

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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 four stocks were showing bearish trends. They included UPL, , and .

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 (eg. 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 Monday, the Nifty50 was trading above 16,350.

Mohit Nigam, Head – PMS, Hem Securities, said, on the technical front, the key resistance level for Nifty50 is 16,400 followed by 16500 and on the downside 16,000 and 15,750 will act as strong support.

“The key resistance level for Bank Nifty is 34,500 followed by 34,800 and on the downside 33,800 and 33,400 will act as strong support,” he added.

Understanding MACD
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.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)


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