BB, the point I was making is that a cross of the zero line on the MACD is defined as a cross of the 2 EMAs, is it not ?
See the 2nd paragraph below:
"MOVING AVERAGE CONVERGENCE-DIVERGENCE INDEX (MACD)
The MACD is a two-component indicator based on two exponential moving price averages. Because of the early signals, which can be derived from this indicator, it is regarded by many analysts as helpful in the trading of stock options. MACD is more classic version of the Price Phase Indicator.
The first component of the MACD is a line, which represents the difference between two moving averages; each computed for a different period of time. This first component is called Price Phase Line. The second component, which is called the Signal Line, is an exponential average of the first component.
The two lines are charted together on the same time scale. If you have not changed the default color settings, the Price Phase Line is green and the Signal line is purple. You can also determine which line is which by the position of the lines during periods when a definite trend is established. The Price Phase Line is the upper line during upward price movements and the lower line during downward movements. The Signal line, being an average of the Price Phase Line, is the lower line during upward moves and the upper line during downward moves.
As a general rule, it is considered bullish when the Price Phase Line is rising and is above the Signal Line. Conversely, it is bearish when the Price Line is falling and is below the Signal Line.
Buy and sell signal are generated by the crossing of the two lines. In general, a buy signal occurs when the Price Phase Line crosses from below to above the Signal Line. A sell signal is indicated when the Price Phase Line crosses from above to below the Signal line.
An example of a buy signal can be seen on the chart for International Flavors & Fragrances (IFF). The stock moved sideways from September through late October of 1994. At the same time, the MACD was making higher lows. On October 26, the Price Phase Line crossed above the Signal Line and continued to rise. This proved to be an excellent buying opportunity.
Because of its smoothed nature, this indicator can be helpful in highly volatile markets such as the options market. Although generally less effective during narrow, trendless markets, it provides good signals during widely swinging trading ranges and at the conclusion of strong trends.
MACD is especially valuable for its ability to signal a turnaround following a sharp decline. In this situation, divergences are particularly significant and often predate important market bottoms. Divergences pertain to trends and occur when the trend of price action and the trend of an indicator are in opposite directions.
In addition to trend breaks, divergences, and Signal Line crossing, it is important to watch for overbought and oversold levels. When the MACD rises above a certain level, the ticker is in an overbought region and reversal is likely. The same is true in the oversold direction."
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