RIL, Granules India among 85 stocks sending sell signals on MACD

NEW DELHI: As selling intensified in the market on Wednesday, as many as 85 stocks on NSE were sending strong 'sell' signals on MACD or moving average convergence divergence.

The momentum indicator signaled bearish crossovers on these stocks — a sign of bearish undertone — hinting at possible downsides in the days ahead.

The list included India's most valued stock Reliance Industries, whose shares have fallen 5 per cent in four days. NBFCs such as power finance companies REC and PFC, housing finance major Indiabulls Housing and brokerage stocks such as Motilal Oswal and Emkay Global also formed the list.

Granules India, Crompton Greaves Consumer Electricals, Nippon Life AMC, Coforge, PTC India Financial, SCI and Godrej Properties were some other notable stocks sending bearish signals on the momentum indicator. These stocks were down up to 4 per cent so far in trade.


MACD is known for signaling 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 gives a bullish signal, indicating that the price of the security may see an upward movement and vice versa.

Data showed 15 stocks are showing bullish trends. They included Trident, Kesoram Industries, Dollar Industries, Dr Lal Pathlabs, Subros, Timken India and Tube Investments.

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 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 Wednesday, the Nifty50 breached its broader range of 15,600-900 on the downside even as analysts were expecting the index to defend it. In the process, the NSE barometer also dropped below its 50-day simple moving average that was placed around 15,650 level.

A failure to defend the 15,600 support may cost the bulls dearly as the bears would gain upper hand, analysts had warned on Tuesday.

Sameet Chavan of Angel Broking said it would be interesting to see how the index reacts as it approaches the monthly F&O expiry. He said unless India does not see any major relief from global selloff, a recovery towards 16,000 level is unlikely. Chavan sees next support for the index at 15,550 level.

Understanding MACD
A close look at the stock chart of REC shows whenever the MACD line has breached below the signal line, the stock has shown a downtrend and vice versa.