NEW DELHI: Stocks in India may have gone up for five consecutive days, but dwindling market breadth remains a sticking point.This was evident on Monday as Nifty50 heavyweight Reliance Industries led from front.
What was missing was broad based participation, which has made market a bit cautious.
That in a way suggests 97 stocks on NSE could see correction in coming days, according to momentum indicator moving average convergence divergence, or MACD.
The technical indicator has signalled a downward crossover -- a sign of bearish undertone -- on these counters, hinting at possible downside.
Many of these stocks have been witnessing strong trading volumes of late, lending credence to emerging trend.
The list includes banking stocks such as South Indian Bank, Union Bank of India, Punjab National Bank and IDFC First Bank.Adlabs Entertainment, GMR Infra, Reliance Power, Reliance Capital, DLF, Reliance Infrastructure and UPL too look vulnerable on technical charts.
Torrent Power, Tata Global Beverages, Natco Pharma, MCX, EID Parry, Supreme Infra and Inox Wind PNC Infratech are a few other scrips that may see weakness in days ahead.MACD -- difference between 26-day and 12-day exponential moving averages -- is known for indicating trend reversals in traded securities or indices.
A nine-day exponential moving average called signal line is plotted on top of MACD to reflect 'buy' or 's ell' opportunities.
When MACD goes above signal line, it throws up a bullish sign, indicating that price of security may see an upward movement and vice-versa.Meanwhile, 24 stocks showed bullish crossover on daily charts.
These include SPARC, Hindalco Industries, HDFC, Omaxe, Trent, Thirumalai Chemicals, Mahindra Logistics and TTK Prestige.The MACD indicator should not be seen in isolation as it may not be sufficient to take a trading call, just way a fundamental analyst cannot give a 'buy' or 's ell' call using a single valuation ratio.
Traders should use other indicators such as Relative Strength Index (RSI), Bollinger Bands, Fibonacci Series, candlestick patterns and Stochastic to confirm an emerging trend, say analysts.As far as Nifty is concerned, only a few stocks such as Reliance Industries, Infosys, HDFC and Kotak Mahindra Bank is driving index.The broader market indices are diverging from benchmark index for last few sessions.
Once last leg of pullback gets over, Nifty is also likely to follow suit and can see lower levels, Gaurav Ratnaparkhi of Sharekhan said.Daily strength indicator RSI and momentum indicator Stochastic both are in a bullish mode, which supports upside bias.Short-term Nifty traders are advised to put their stop loss level below 10,880 on a closing basis, said Mazhar Mohammad of Chartviewindia.in.UNDERSTANDING MACDA close look at stock chart of Union Bank of India reveals that every time MACD line has breached below signal line, stock tended to show a downward momentum and vice versa.
On Tuesday, scrip traded 1.97 per cent lower at Rs 84.60.