INSUBCONTINENT EXCLUSIVE:
recovery, but technical charts suggested it might just be a dead-cat bounce
Analysts said any bounce at this stage may be shallow and traders must exercise caution
But all is not that gloomy.
There are a handful stocks that look strong on the charts, as suggested by momentum indicator moving average
convergence divergence, or MACD.
The technical indicator signalled upward crossover, which is a bullish signal, for at least 15 stocks,
hinting at possible upsides for these stocks.
Some of these counters have also been witnessing strong trading volumes of late, adding
further credibility to the emerging trend.
Among the stocks that signalled such bullishness are Titan Company, Talwalkars Better Value
Fitness, Bhansali Engineering Polymers, Aster DM Healthcare and Gujarat Pipavav Port.
Others included Viceroy Hotels, Tijaria Polypipes,
Morarjee Textiles, Take Solutions and Gokul Agro Resources.
The MACD is known for signalling trend reversal in a traded security or
index.
It is the difference between the 26-day and 12-day exponential moving averages
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.
Among the stocks that witnessed this bearishness were metals majors Vedanta and Hindalco Industries, natural gas
transmission company Gujarat State Petronet, maker of defence products Astra Microwave and AC generator TD Power Systems.
Others included
Cyient, Vikas Ecotech, Indian Terrain and Kilitch Drugs.
That said, the MACD indicator should not be seen in isolation and it may not be
ratio.
Market veterans say the MACD alone may not be good enough to help take an investment call
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 Nifty50, Gaurav Ratnaparkhi, Senior Technical Analyst at Sharekhan, said the impulse
structure looks incomplete on the way down on the daily chart
Thus, any bounce is likely to be a shallow one
The Nifty50 is on the verge of seeing a bounce from the lows, but the sustainability of the upmove is doubtful, said Nagaraj Shetti,
Technical Research Analyst at HDFC Securities
Shetti said the 10,500-550 zone is going to be a strong overhead resistance for the index
The Nifty50 has completed an impulse on the hourly chart.
Mazhar Mohammad of Chartviewindia.in, meanwhile, said the intraday recovery
appeared to be on the strength of a few largecap stocks, which attracted value buying at lower levels
Understanding MACD A close look at the stock chart Titan Company shows whenever the MACD line has breached below the signal line, the stock
tended to show an downward momentum and vice versa.
On Monday, the stock rose 2.7 per cent to close at Rs 813.45 on NSE.
