Quote from chrdso:
I do look at the MACD for trend and momentum analysis.
For bullish signals:
1) Look for MACD line (difference between a 12 and 26 exponential moving average) crossing above the signal line (9 day exponential moving average of the MACD. For shorter time frames I think you use the 8-17-9 MACD.)
This kind of crossover occurs often and you have to combine with other indicators to prevent being whipsawed.
2) MACD line crosses over the center line (This means that the 12 day MA is above the 26 day MA) - uptrend.
This is what I saw happen on the XEO recently (in addition to the MACD crossing over signal line). So, I bought the Dec. 580 calls, which have doubled since. I also closed my Nov xeo bear call spread (for a loss. but, overall small credit because of the IC). I bought back for1.60, that spread is now 3.30. So, I would have lost if I held on.
3) Divergence - When the MACD has higher lows, but the price of the index is still falling. This happens less often, but is more reliable and indicates a trend change.
The MACD (2 lines) is a lagging indicator. So, you will not catch the start of a trend. If you use the MACD histogram (difference between the MACD and signal line - I think), you can catch a crossover (histogram above center line ) before it happens. 1) bars getting shorter 2) A divergence between histogram and MACD line (i.e. MACD line falling, but histogram bars becoming shorter- indicates a change in trend).
Also, the higher (longer) the bars the greater the momentum.
Coach (anyone), what technical indicators do you use? How do you use fib. lines?
