Wednesday, November 5, 2008

For GT Blog November 05, 2008

Technical Indicators - when, how, why

One of to-day's most popular and over-used technical study is the MACD (Moving Average Convergence/Divergence): An indicator using the difference between two exponential moving averages. The difference is plotted as an oscillator.

It is best used on WEEKLY charts

The problem is most investors use the MACD incorrectly and will get trapped by a false move

The best way to use the MACD is to look for a divergence set-up.

That means the PRICE makes a new high and the MACD fails to move to a new high (bearish)

OR - the PRICE makes a new low and the MACD fails to move to a new low (bullish)

Note the bullish MACD setup on Rogers


Piazzi said...

Mr. Carrigan,

drawing upon your experience, does market action and pschological and economical conditiond remind you of any past period of market malaise.



chrispycrunch said...

I have used MACD on daily and at times. sometimes a stock rallies after price diverges down from a rising MACD. But many times the rally does not last and the stock finds resistance at one of the moving averages.