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Invest Now: Find Winning Trades with the MACD indicator

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In my prior post on the MACD technical indicator, I explained how to interpret the MACD line, the signal line (a 9-day EMA of the MACD line) and the histogram (showing how far above/below the signal line the MACD line is). Today, we’ll evaluate some stocks to practice using the MACD as a trading indicator.

Things to Look for With the MACD

When studying the MACD chart, you should be looking for two things:

  • Signal line crossovers, which indicate near-term momentum is increasing (for a crossover up) or decreasing (when the MACD crosses downwards over the signal line). Signal line crossovers are the most common MACD signal and are a good buy/sell indicator.
  • Center line crossovers, which also indicate momentum to the upside or downside.

MACD charts don’t have a max or a min, so it’s possible for them to bump along a historically high or low number repeatedly crossing over, which isn’t a particularly useful signal. What you want to look for is a solid trend where it it’s been rising and crosses over, or the MACD has been declining and crosses over. Assuming momentum holds, that’s a solid signal.

Stock Trade Examples

Here are some stocks that might make good trades right now, as learning examples.

RNF:

RNF

RNF shows a classic MACD crossover down over the signal line here. The stock price is just bouncing around but momentum has been lost and it’s time to get out of the stock.

AZN:

 AZN

AZN shows what a bullish crossver of the signal line looks like. Here it crosses over and if you had decided to invest in the stock then, you would have watched it take off higher from $46 to $49 and been glad you looked at the MACD indicator!

Conclusion

Using the MACD indicator is NOT hard. There’s no reason not to look at it, regardless of whether you are a day trader, a swing trader, or have studied the fundamentals and plan to invest for the long haul. There is no point to get into a stock right as it breaks down – and no point to sell right before it takes off. Use the MACD, perhaps in our Stock TickerPicker investing software, today!

 

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