Moneycontrol
Mar 16, 2017 01:34 PM IST

Technical Check: Sensex hits 52-week high; MACD trend signals buy in nearly 200 stocks

Stocks which have witnessed upwards crossover on the BSE with strong volumes include names like Force Motor, ICICI Bank, Wockhardt, Aarti Industries, BF Utilities, Havells India, TVS Motor, Britannia Industries, Cera Sanitary, Atul Auto, and Pidilite Industries among others.

 
 
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The Indian market welcomed the US Fed rate hike as the Nifty touched a fresh record high, while the S&P BSE Sensex touched a fresh 52-week high. The US Federal Reserve calmed investors’ nerves after it said that the rate hike will be gradual.

The Nifty scaled a fresh peak of 9,152.90 while the S&P BSE Sensex rose to a fresh 52-week high of 29,614.79 earlier today. The momentum was broad based as nearly 200 stocks largely small and midcap stocks triggered a bullish crossover on MACD on Thursday.

The Moving Average Convergence and Divergence, popularly known as MACD, is a trend following momentum indicator shows that as much as 187 stocks on the BSE witnessed an upwards crossover on MACD.

MACD is one of the most effective momentum indicators that can be used to spot a change in the short-term trend of the market. Hence, traders should keep these stocks on their radar while trading.

Stocks which have witnessed upwards crossover on the BSE with strong volumes include names like Force Motor, ICICI Bank, Wockhardt, Aarti Industries, BF Utilities, Havells India, TVS Motor, Britannia Industries, Cera Sanitary, Atul Auto, and Pidilite Industries among others.

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In MACD, two exponential moving averages — 12-day and 26-day — of price are used to indicate the direction and momentum of the market, which can either be strong or weak. A nine-day exponential moving average is used as a line to generate buy or sell signal.

To understand MACD, we should understand what is a crossover? When the MACD falls below the signal line or the MACD Average, it is a bearish signal, which indicates that it may be time to sell.

On the contrary, when the MACD rises above the signal line or MACD Average, the indicator gives a bullish signal or a bullish crossover, which suggests further upside in the offing which was the case in Thursday trading.

For example, in Force Motor, the MACD value is 19.79 and the MACD Average is 19.76. Another company, ICICI Bank whose MACD value is 1,41, which was above its signal line value of 1.21.

However, the MACD indicator may not be sufficient to take an investment or trading call. Investors should use other indicators to take decisions, experts said.

Although the MACD is effective, it is not complete in itself. Traders should make use of other indicators such as RSI, Fibonacci series, candlestick patterns, Bollinger Bands, and stochastic to confirm any trend.
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