NEW DELHI: Indias headline equity indices scaled record highs on Monday, even though the top guns, such as HDFC Bank, Reliance Industries, Wipro and Bajaj Auto, failed to fire.Even as the 50-share Nifty gained 74 points to end at a six-month high of 11,084, less than 100 points shy of its all-time high, momentum indicator moving average convergence divergence, or MACD, showed bullish crossovers on 87 counters on NSE.
The MACD is known for signalling trend reversal in a traded security or index.Among the counters that saw bullish crossovers were UPL, ICICI Bank, Reliance Power, Tata Motors, Bank of India, Allahabad Bank, Punj Lloyd and Union Bank of India.
Some of these counters have also been witnessing strong trading volumes recently, adding further credibility to the emerging trend.
Other stocks that gave this bullish indication included Bata India, Andhra Bank, Canara Bank, Bharat Electronics and Jet Airways, India Cements, Bharat Heavy Electricals, Infosys, Oriental Bank of Commerce and Dena Bank.Meanwhile, the MACD charts also signalled bearish crossovers for 33 stocks on NSE, indicating sell signals.
They included South Indian Bank, Jain Irrigation, Balrampur Chini, JK Tyre Industries, Aksh Optifibre, Dilip Buildcon and Kavveri Telecom.
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 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.TABLE - 1The MACD alone may not be a sufficient signal 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.
Retail investors should consult financial experts before buying or selling a stock based on such technical indicators.
TABLE - 2The Nifty50 index on Monday formed a small bullish candle on the daily chart.
A sustainable upward move from here on could confirm a breakout of this range.
In such a scenario, one may expect Nifty to take out its January peak of 11,171, said Nagaraj Shetti of HDFC Securities.
A close above this range may set up a fresh target at 11,241, said Mazhar Mohammad of Chartviewindia.in.Mohammad advised traders to go for fresh long positions with a stop loss below 11,000 on a closing basis and look for bigger targets.Understanding MACDA close look at UPL stock chart shows whenever the MACD line has crossed above the signal line, the stock has always shown an upward momentum and vice versa.
Shares of the company closed 15 per cent higher at Rs 631.65 on July 24.