How to interpret MACD
How to interpret MACD?
As discussed in the previous article, MACD has 3 parts
MACD Line – Difference of SLOW and FAST Averages. I.e; (12-Day – 26-Day)
Signal Line – 9-day Exponential Moving Average of MACD line.
MACD Histogram: MACD Line – Signal Line
There is also a zero line which separates negative and positive zones.
Signal line crossovers:
When a MACD line crosses over the Signal line it represents a positive or upward momentum in the price movement of the stock.
Similarly, when the MACD line crosses under the Signal Line it represents a negative or downward momentum in the price movement of the stocks.
In short stock is bullish when MACD line turns up and crosses over Signal line and bearish when turns down and crosses under Signal Line.
Zero line crossover:
When the difference between 12-day and 26-day exponential moving average is positive, the MACD and Signal lines will be above zero line.
When the difference between 12-day and 26-day exponential moving average is negative. the MACD and Signal lines will be above zero line.
When these line move from positive to negative or negative to positive, they move across the zero line.
The stock is bullish when the MACD and Signal lines cross over the zero line from negative zone, and bearish when the MACD and signal line cross under the zero line from positive zone.
How to look for accurate signals?
When a MACD line crosses over Signal line above zero line, look for buying opportunities.
When a MACD line crosses under Signal line below zero line, look for selling opportunities.
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