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MACD offers both trend following and momentum.

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TREND1 Member Level  Monday, 09/23/13 09:32:29 PM
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MACD offers both trend following and momentum.

Positive MACD indicates that the 12-day EMA is above the 26-day EMA. This means upside momentum is increasing.

Negative MACD values indicates that the 12-day EMA is below the 26-day EMA. This means downside momentum is increasing.

A distance less than 1 point is not a big.

(1)Signal line crossovers at positive or negative extremes should be viewed with caution.

(2)Centerline crossovers are the next most common MACD signals.

A bullish centerline crossover occurs when the MACD Line moves above the zero line to turn positive. This happens when the 12-day EMA of the underlying security moves above the 26-day EMA.

A bearish centerline crossover occurs when the MACD moves below the zero line to turn negative. This happens when the 12-day EMA moves below the 26-day EMA.

Centerline crossovers can last a few days or a few months.
It all depends on the strength of the trend.
The MACD will remain positive as long as there is a sustained uptrend.
These signals can result in numerous whipsaws because strong trends did not materialize after the crossovers.
Stops required.



(3)Divergences form when the MACD diverges from the price action of the underlying security.

A bullish divergence forms when a security records a lower low and the MACD forms a higher low.

A bearish divergence forms when a security records a higher high and the MACD Line forms a lower high.

Divergences should be taken with caution.
Bearish divergences are commonplace in a strong uptrend, while bullish divergences occur often in a strong downtrend.

MACD(5,35,5) is suited for weekly charts.


The MACD is not particularly good for identifying overbought and oversold levels.

It is possible to identify levels that are historically overbought or oversold

During sharp moves, the MACD can continue to over-extend beyond its historical extremes.





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