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To Trend or Not to Trend by kensey |
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The strongest MACD crossovers occur near the centerline.
A MACD crossovers near the centerline usually heralds the start of a new upward trend. Crossovers that occur higher above the centerline tend to indicate the continuation of an existing trend. It's all about center, and where the crossover occurs in relation to it. |
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Unisys Corp (UIS)     |
This stock has been trending up so consistently that, until recently, the MACD indicator graph (3rd from the bottom) was entirely in positive ground. So, in this case, the bottom of the indicator graph is the centerline. This only occurs for the strongest stocks. That said, the crossovers that occurred in mid-April and mid-June are the best ones on the graph. The fast line crosses over the signal line right at the centerline. The important thing now is to do a little pattern matching. Both of the crossovers in mid-April and mid-June occurred after benign basing periods in which prices changed little. These basing periods are captured underneath the trendlines drawn in black. The crossover in mid-March (that resulted in a green MACD trending bar) occurred higher above
center. The crossover in mid-July is also occurring high above
center. The reason for the July trending bar is the momentary dip in prices
in early July. Even though the trending bar was taken down, it did not signal an
end to the uptrend, but rather that the trend was pausing and the rate of
acceleration in prices was slowing. For the trend to end, the MACD lines must penetrate the centerline and
start tracing below it in negative ground.
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