Adani Power, ZEEL, JSW Energy among 74 stocks that look set to rally in coming days

NEW DELHI: With domestic equities staging a rebound this week, dozens of stocks, mostly midcaps, have sent out ‘buy’ signals on the technical charts.

As many as 74 such stocks looked stronger on momentum indicator moving average convergence divergence or MACD.

The momentum indicator signalled bullish crossovers — a sign of bullish undertone — on these counters, hinting at possible upsides in the days ahead. The list included JSW Energy, , Zee Entertainment, Aditya Birla Fashion, India Cements and Jain Irrigation. These stocks gained up to 10 per cent in Tuesday's trade.

Apollo Hospitals, Wockhardt, PI Industries, Nippon Life AMC, Rallis India, KEC International and Fortis Healthcare are some of the other names that looked strong on the MACD indicator.

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 indicate ‘buy’ or ‘sell’ opportunities.

When the MACD crosses above the Signal Line, it sends out a bullish signal, indicating that the price of the security may see an upward movement and vice versa.
Data showed 14 stocks are showing bearish trends. They included UCO Bank, Tata Motors, Indus Towers, Karur Vysya Bank, HEG and Somany Ceramics, among others.

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.

This is because MACD is a trend-following indicator. Though traders can increase the sensitivity of the MACD by using shorter moving averages for computing MACD (e.g. 5-day and 12-day moving averages), the lag effect will still be there. Hence, 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 Tuesday, the Nifty50 moved past the 14,850 level.

“On the upside, the 14,900-15,000 zone will be the immediate resistance range for Nifty50 and one should look to lighten up long positions on any pullback towards this range. A move above the recent swing high of 15,178 will only negate the recent short-term corrective structure. On the flip side, the 14,630 level followed by 14,500 are the immediate supports for the index,” said Sameet Chavan of Angel Broking.

Understanding MACD
A close look at the stock chart of JSW Energy shows whenever the MACD line has breached above the signal line, the stock has shown an uptrend and vice versa.