There is something to note for those who are still sitting in front of their computer trying to figure out their strategy or finances for 2015. The daily MACD is giving us a clue and its a very important one that I have seen over and over and over again. It is the fact that this indicator is sitting near the zero line. So what is this zero line all about? Well its basically another way of showing us a bullish or bearish trend (but a lagging one). You are probably asking "Why then is this a clue if its a lagging indicator". Sometimes, the way it is setup can be a foretelling advantage..
In this case for our current MACD, it is occurring in almost all markets. It is also diverging from the price highs. When a price moves in a impulsive manners indicators tend to get left behind (this is how divergence is formed negative / positive). A cross of the MACD down or up shows a "possible" change in trend, but a cross below or above the zero line shows a much more bearish or bullish trend. If the price is over extended and the indicator seems to slow or even halt it is a sign that momentum is not following, therefore the MACD being close to the zero line is actually a distressing sign. The deeper a signal is or the higher the signal is the bigger chance of that trend lasting longer and higher chance of lagging.
So watch if prices move down if this MACD crosses below the zero line. A few examples for you if you are not convinced or are confused.
MT: UP
ST: UP
PA: DOWN
Note: Indicators will lag, but it is not a cause of concern if we know how to use it. So when a signal is closer to a line that dictates a bullish or bearish trend one must be aware of it because any change in trend will give us the opportunity to get into or out of a position without lag or without high risk of missing out or getting out.
GOOGL
NFLX
Wishing you all a Happy New Year.... Goodbyes are sad... but take the next step in to 2015
ReplyDeleteAnd a Happy New Year to you as well and to all the readers out there..
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