MACD - Moving Average Convergence & Divergence

This is one of the important technical analysis techniques and is used to predict movements in the stock market. MACD is the difference between short term moving average and long term moving average. This difference helps in identifying, whether prices in the recent past have moved upward or downward as compared to longer period movement. With the help of MACD line various signals can be generated. 

            MACD = Short period moving average (Minus) long period moving average

Simply buy and sell signals can be generated with the help of MACD, when this indicator is in a positive zone, it indicates buying as the share prices are likely to move upward in future. On the contrary, when

Other Important Signals

• Whenever the MACD line is above the zero mark line, it indicates the signal of bullish market for the scrip and whenever it is below the zero mark line, it is signal of bearish market.

• Whenever MACD line is above the zero mark line, but declining it is early warning signal of a bearish market and again if it is below the zero mark line but rising it gives signals of a bullish market ahead.

• Whenever MACD line forms a peak at  the top it give signals that the market will soon turn bearish, i.e. it represents overbought situation and if the line reaches its bottom it signifies oversold situation, i.e. the market will start becoming bullish.