Take guard! MACD charts show these 42 stocks are set to tumble

Image result for Take guard! MACD charts show these 42 stocks are set to tumbleStocks that saw bearish crossovers in Monday’s session were Gammon Infra, Karnataka Bank and Aban Offshore among others.

NEW DELHI: NSE’s Nifty50 index settled just 34 points shy of the magical 11,000 mark on Monday, as the broader market continued to march on.

But momentum indicator Moving Average Convergence Divergence, or MACD, signalled bearish crossovers on 42 counters on NSE.

Market experts advised traders to follow strict stop losses ahead of the F&O expiry at the end of this holiday-truncated week.

Among the counters that saw bearish crossovers in Monday’s session were Gammon Infra, Karnataka Bank, Aban Offshore, Shalimar Paints, Marksans Pharma, Central Bank, Control Print, Symphony, JSW Holdings, Rainbow Papers, Gravita India and Zee Learn.

Some of these counters also witnessed strong trading volumes, adding further credibility to the emerging trend.

Other stocks that witnessed bearish crossovers included Zydus Wellness, Jayant Agro, Chennai Petro, Mahindra Holidays, Rama Steel Tubes, GTPL Hathway.

MACD is a trend-following momentum indicator, and 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 slips below the signal line, it gives a bearish signal, indicating that the price of the security may experience a downward movement, and vice-versa.

MACD crossed below signal

However, the MACD alone may not be a sufficient indicator to help take an investment call. Traders should make use other indicators such as Relative Strength Index (RSI), Bollinger Bands, Fibonacci Series, candlestick patterns and Stochastic to confirm such trends.

Retail investors should consult financial experts before buying or selling a stock based on such technical indicators.

Monday’s MACD charts also showed that 16 stocks witnessed bullish crossovers on NSE, giving ‘buy’ signals. The stocks included Reliance IndustriesBSE 1.08 %, Biocon, V-Guard Industries, LIC Housing Finance, Godrej Industries, Ajanta Pharma and Kirloskar Oil Engine.

macd crossed above signal

On Monday, the Nifty50 made a clear breakout from the 10,900 level to settle at a record closing high of 10,966. In the process, it formed a strong bullish candle on the daily chart. The index has been forming higher highs and higher lows for last three sessions, suggesting that supports are shifting higher.

Rajesh Palviya, Head Technical & Derivatives Analyst at Axis Securities, said for the coming session, the 10,980 level would be the immediate resistance to watch out. Any sustainable move above this will give Nifty further strength and take it to 11,000-11,030 levels.

On the downside, an immediate support is placed around the 10,920 level. As hourly and daily charts are approaching overbought territory, it may be a cause of concern in the near term as profit booking at higher levels can’t be ruled out.

Below 10,920 level on Nifty, accelerated profit booking is possible, in which case the index may slip towards 10,870 and 10,840 levels. Day traders are advised to be cautious and should keep strict stop losses, he said.

Chandan Taparia, Derivatives and Technical Analyst, Motilal Oswal Financial Services, said the Nifty50 has to continue to hold above 10,850 to extend its move towards 11,050 and then 11,100 levels. On the downside, support is seen at the 10,800 level.

Understanding MACD

Adani Enterprises

A close look at the chart of Adani EnterprisesBSE 2.95 % shows whenever the MACD line has crossed above the signal line on the counter, the stock has always shown an upward momentum and vice versa.

Shares of the company closed 0.25 per cent down at Rs 199.20 on Monday.

[“Source-economictimes”]