NEW DELHI: The weak momentum in the market is making investors jittery. While crude prices have come off a bit, a depreciating rupee has intensified foreign outflows, which is taking a toll on investor sentiment back home. Corporate earnings, too, have been anything but inspiring.
The only silver lining is that Nifty50 is defending the 10,000 mark strongly.
But despite the fragile environment, there are as many as 127 stocks on NSE that look strong on the daily charts, as suggested by momentum indicator moving average convergence divergence, or MACD.
The technical indicator saw an upward crossover to give a bullish signal on these counters, hinting at possible downsides for these stocks.
Some of these counters have also been witnessing strong trading volumes of late, adding further credibility to the emerging trend.
The list included Tata group stocks Tata Motors and Tata Steel, drug makers Divis Labs, Wockhardt and Lupin and NBFCs Edelweiss Financial Services and JM Financial.
Others included SAIL, CESC, L&T, Prakash Industries, UPL, RBL Bank and Orient Paper also witnessed upward crossovers, suggesting possible upsides for these stocks.
The MACD is known for signalling trend reversal in a traded security or index.
MACD 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.
Twenty-two companies, including HDFC Bank, GMDC, Hathway Cable, HT Media, Whirlpool of India and NLC India, witnessed bearish crossovers on the daily charts.
The MACD indicator should not be seen in isolation and 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.
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.
As far as the Nifty50 is concerned, experts believe intraday pullbacks towards 10,200 and 10,160 levels are likely to be bought into.
“The 10,290 level should be watch out for. A sustainable move beyond it would trigger a bout of short covering that may push the index towards the 10,400-10,440 range,” said Sameet Chavan of Angel Broking.
He advised traders to go one step at a time and keep revising stop losses for existing positions.
Mazhar Mohammad of Chartviewindia.in said traders are advised to adopt a cautiously optimistic stance and should maintain a tight stop loss for long positions below the 10,020 level.
A close look at the stock chart of Tata Motors shows whenever the MACD line has breached above the signal line, the stock tended to show an upward momentum and vice versa.
On Tuesday morning, the stock traded 1.9 per cent higher at Rs 178.75 on NSE.