Beware! MACD charts show these 106 stocks all set to take a tumble

NEW DELHI: A sharp 1,800-point plunge in the BSE Sensex in just five sessions till Monday has left investors and traders wondering what lies ahead.

Rumours about liquidity crunch and major asset-liability mismatch among NBFCs, a steady slide in the rupee, a spike in crude prices, flareup in US-China trade tensions and uncertainty ahead of the US Fed policy review have triggered a major spurt in fear gauge India VIX to the 17 mark.

The benchmark indices have fallen below the 100-day moving averages and are signalling a weak outlook.

While most stocks have already seen a significant drop, momentum indicator moving average convergence divergence, or MACD, has signalled downward crossovers, meaning a bearish signal, on at least 106 counters, suggesting that these stocks may see further downside in the days ahead.

Some of these stocks have also been witnessing strong trading volumes in recent time, adding further credibility to the emerging trend.

Among the stocks that witnessed such bearishness were Suzlon Energy, Balrampur Chini, Tata Steel, Hathway Cable & Data, Jindal Stainless and Castrol India.

Others included MTNL, Meghmani Organics, Mercator, Grasim Industries and Gruh Finance.


The MACD is known for signalling trend reversal in a traded security or index. 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 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.

Only three stocks –TCS, TD Power Systems and Oswal Agro Mills – showed bullish crossovers on MACD charts on NSE.


However, the MACD indicator should not be seen in isolation and it may not be sufficient to take a trading call based on this indicator alone, just the way a fundamental analyst cannot give a ‘buy’ or ‘sell’ recommendation using a single valuation ratio.

Market veterans say the MACD alone is not 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.

Analysts say for the Nifty50, the ongoing correction may continue, barring a few short-term bounces. “The index has closed below the rising trend line, indicating that the bearish trend is likely to continue. On its way down, the index should drift lower towards the 10,866 mark and, subsequently, towards its short-term target of 10,815. On its way up, the 11,170-11,233 range will act as a key resistance. Any pullback towards the resistance level shall be considered as selling opportunity,” said Gaurav Ratnaparkhi, Senior Technical Analyst at Sharekhan

As long as Nifty holds below 11,080, weakness will continue and drag it towards its recent swing lows of 10,866 and 10,850, said Chandan Taparia of Motilal Oswal Securities. This range is the 50 per cent retracement of the entire upswing from 9,952 to 11,760 levels.

Understanding MACD

A close look at the stock chart of Suzlon Energy shows whenever the MACD line has breached below the signal line, the stock tended to show an downward momentum and vice versa.

On Monday, the stock fell 3.70 per cent to close at Rs 6.50 on NSE.