Comment on Indicators (Part 2)

invest_novice commented on 11 Jan 2018, 02:39 PM

The exact lines are

As you can see the MACD line oscillates over a central zero line. This is also called the ‘Center line’. The basic interpretation of the MACD indicator is that:

1. When the MACD Line crosses the center line from the negative territory to positive territory, it means there is divergence between the two averages. This is a sign of increasing bullish momentum; therefore one should look at buying opportunities. From the chart above, we can see this panning out around 27th Feb
2. When the MACD line crosses the center line from positive territory to the negative territory it means there is convergence between the two averages. This is a sign of increasing bearish momentum; therefore one should look at selling opportunities. As you can see, there were two instance during which the MACD almost turned negative (8th May, and 24th July) but the MACD just stopped at the zero line and reversed directions

In the above two points the terms convergence and divergence can be dropped.

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