Maruti, Hero MotoCorp, MCX among 76 stocks ready to rally, shows MACD

NEW DELHI: Wednesday could mark the fifth consecutive session of gains for Nifty50, thanks to revived investor sentiment on easing of trade tensions globally and hopes that central banks globally would announce more stimulus to stem the economic slowdown.

Back home, steps taken by the government to lift consumption demand have also helped lift the sentiment.

On the technical charts, some 76 largecap and midcap stocks showed bullish trade setups. These stocks might head higher in the coming days, if one were to go by the moving average convergence divergence or MACD.

The momentum indicator signalled a bullish crossover on these counters, hinting at possible upsides. These stocks have been witnessing strong trading volumes of late, lending credence to the emerging trend.

The list included auto stocks Maruti Suzuki and Hero MotoCorp and aviation stock InterGlobe Aviation, besides Godrej Consumer Products (GCPL), Adani Power, MCX, Edelweiss Financial Services, Graphite India, Shriram Transport, Rallis India, Strides Pharma and Avenue Supermarts, among others.



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 29 stocks were showing bearish trends. They included HCL Technologies, Apollo Hospitals, Den Networks, Century Enka, FIEM Industries and Shemaroo Entertainment.



However, analysts say 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.

Sameet Chavan of Angel Broking advised traders to trade with a positive bias and look to pick up stocks from the midcap space as they may outperform the broader market in the short term.

For Nifty50, the 11,100-11,180 range is filled with multiple hurdles, where the ongoing pullback is likely to die down.

"A sustained trade above 11,050 can extend the bounce to 11,100 and 11,150 levels. On the flip side, a move below 10,980 level can drag Nifty lower toward 10,940 and 10,920 levels,” said Aditya Agarwala, Senior Manager, Technical Analysis at YES Securities.

Understanding MACD

A close look at the stock chart of Hero MotoCorp shows whenever the MACD line has breached above the signal line, the stock has shown an upward momentum and vice versa. On Wednesday, the scrip traded 1.3 per cent higher at Rs 2,724 on NSE.