NEW DELHI: The New Year may have started on a dull note for domestic equities, but a smart bounce in the benchmark indices during the last four sessions has made many stocks look strong on technical charts.
On NSE, 63 such stocks may advance in the coming days, as suggested by momentum indicator moving average convergence divergence, or MACD.
The technical indicator has signalled an upward crossover, meaning a bullish signal, on these counters, hinting at possible upsides. Many of these stocks have also been witnessing strong trading volumes of late, adding further credibility to the emerging trend.
Others included Jayshree Tea, PVR, Phillip Carbon, Mahindra CIE Auto, Aegis Logistics, Future Lifestyles, Godrej Agrovet, Vinati Organics and SP Apparels, 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.
Meanwhile, 30 stocks showed a bearish crossover on the daily charts. They include Tata Steel BSL (erstwhile Bhushan Steel), Asian Paints, CESC, Mercator, Omaxe, Sunteck City and Ducon Infratech.
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 call using a single valuation ratio.
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.
As for Nifty50, it is ruling below its breakout point of 10,920. If it breaches this level, it will unfold the next leg of rally towards 11,050, 11,200 levels.
Sameet Chavan of Angel Broking believes the index may find support in the 10,840-10,800 range.
Meanwhile, daily strength indicator RSI continued to remain flat in the overbought zone, indicating absence of strength. But momentum oscillator Stochastic continued to scale up, signalling that the upside momentum may continue in the near term, said Rajesh Palviya, Head of Technical & Derivatives Analyst at Axis Securities.
A close look at the stock chart of HCL Technologies shows whenever the MACD line has breached below the signal line, the stock has showed a downward momentum and vice versa.
On Tuesday, the scrip traded 0.49 per cent lower at Rs 957.80 .