The new Signals pages give you a snapshot of the MACD divergence signals across all NASDAQ stocks.   This gives you a quick and easy way to find these elusive signals without flipping through thousands of charts.

In keeping with our mission as an educational resource, these MACD divergence signals are posted to show you an easy way to find examples for further study.   Before trading, we strongly enourage you to assess the track record for divergences — it is not perfect — by reading either the reports or videos in the Truth About MACD Series.

The divergences sought and presented by the scanners are:  

• MACD Divergences using the MACD line or Appel’s Histogram
• MACD Histogram Divergences using the common MACDH 

The scheduled update times are:

Weekly MACD and MACDH Divergences: once a week, calculated on each Friday close and posted no later than Monday evening

Daily MACD and MACDH Divergences: twice a week:

• calculated on each Friday close and posted no later than Monday evening
• calculated on each Wednesday close and posted no later than Thursday evening

Trend Analysis is provided on each stock symbol by affiliate partner INO.com, giving you complimentary technical analysis briefings using entirely different criteria.   Trend Analysis uses trend following techniques while MACD Divergences are a reversal technique.    You can consider both for a more balanced view of each market.   To get the Trend Analysis, click the symbol on the Signals page list - it costs you nothing and and no payment info will ever be requested.

Check out the Signals pages today:

• MACD Divs Daily
• MACD Divs Weekly
• MACDH Divs Daily
• MACDH Divs Weekly

Tags: INO, MACD, MACD divergence, MACD Histogram, macdh, signal

Since its not always easier keeping up with the market over a long holiday weekend, I thought to share my weekly “homework”.

Plenty of interesting red flags from my MACD Divergence Detector running on StockFinder®.   It found MACD and MACDH negative divergences on SPY, DIA, ISRG, BIDU to name a few.    Looking at the chart of SPY below, its clearly not the first negative divergence.

MACD Lines and Histogram do not confirm price action on SPY (click to enlarge)

The other SPY negative divergences kicked off a slight decline, followed by a rally.   What’s to say that won’t be the case again?

First off, consider that the markets may very well rebound again.  It is, after all, a seasonally strong time of year.  I don’t want to make recommendations or predictions here, just share some observations.  See Truth About MACD BackTesting Reports  for data on the historical back test performance of MACD divergences.

The next observation to share is that breadth and New Highs / New Lows (NH-NL) exhibit extraordinary negative divergences of their own.   Here’s a chart with McClellan’s Summation Index to show what I mean.   (Note that I didn’t personally run a back test of McClellan’s Summation Index.   Tom McClellan told me he did.  I wish the strategies of other people who have told me that had performed better in my back tests.  Anyway, until I get around to doing the back test myself, I am taking McClellan’s word that the summation index that bears his name is a useful indicator to have in the toolbox.)

Red arrows highlight divergence between SPY (green) and McClellan Summation Index (yellow)

With these kind of negative divergences showing I am certainly not thinking of buying the dip!   In fact,  negative divergences are a signal to sell long positions in my book.    

If you are also standing near the door (so to speak), or working on your own stratgy for cutting losses and taking profits, you may want to take a look at the Exit Strategies series of BackTesting Reports.   They show back test results for various kinds of fixed stop losses, trailing stops losses, and profit targets.    That stuff isn’t as glamorous as buy signals but if you didn’t make a solid plan for when to sell before you bought, the next best time to think about these things is while the market is up.

Tags: breadth divergence, exit strategies, MACD, MACD divergence, macdh, sell, selling, strategy

MACD Divergence on SPY Weekly Chart

MACD Divergence typically means a divergence between the MACD technical indicator and price.   The name MACD divergence is a little confusing and new traders are inevitably unclear about the definition of a MACD divergence or, most importantly, how to recognize one.  Once identified, the next question is how long after the MACD divergence signal does it remain a consideration in the analysis of price action.   Finally, or (perhaps initially to know why we might care) , what kind of performance might a trader expect from a MACD divergence — win rates, expectancy, drawdowns, tendency to jump stops - these are all important considerations to a trader selecting an indicator or strategy.

Naming

MACD spells out to Moving Average Convergence Divergence.   Adding another divergence on the end of all that may at first seem redundant but really it means that two sets of things are diverging.   The first “Divergence” built into the MACD acronym refers to the movements of the two moving averages that form the basis of the MACD.    (The MACD itself is the difference between two moving averages of price, usually the 12-day EMA and the 26-day EMA. )   The second “divergence” in MACD divergence refers to a disparity between the price action and the movements of the MACD indicator.

Identifying a MACD Divergence

 The basic characteristic of the MACD divergence is that the indicator does not confirm price action.  If the price makes a new low but the MACD indicator makes a higher low, that is called a positive MACD divergence.  

Positive MACD Divergence on IWM*

On the other hand, if price makes a higher high but the indicator makes a lower high, that is called a negative divergence.   Sounds simple enough but in practice there are subtleties such as the appropriate time between extremes of price.     Further, some traders will look for specific characteristics in the divergence such as minimum or maximum price differences between the price extremes or the slope of the price trend at the time of the divegence.    This adds complexity to the identification process.  

An efficient way to identify MACD divergences is to use a software scanner that can identify which stocks, ETFs, or other instruments are experiencing a MACD divergence at the right edge of the chart.

Red arrows highlight the negative MACD divergence on this StockFinder chart of THS at right.

Persistance of a MACD Divergence

Some traders may look at a divergence as an occurrance that impacts an entire trend.   Others may consider that the MACD divergence is only in force until the MACD Histogram moves in the opposite direction.  One way to settle the debate among traders about how long a MACD divergence remains a factor is to back test different scenarios and compare them.

Performance of a MACD Divergence

For a high-level comparison of the historical performance of the MACD Divergence to other MACD signals, watch the free video at the Truth About MACD site.   Or you can read the BackTesting Report #8: Finding Big Bottoms with MACD Divergence, which is part of the Truth About MACD series, for the detailed historical stats from our large-scale back test.   Only with a solid understanding of the strengths and weaknesses of the MACD divergence can a trader  make the best use of it.

* IWM is the ETF of Russell 2000

* SPY is the ETF of S&P500

Tags: indicator, MACD, MACD divergence, strategy

Dear Trader, Trading global markets has changed dramatically since the market meltdown last year. To profit today, it is imperative that you learn expert tactics to become more consistently profitable. And the place to do this is at The Traders Expo Las Vegas, November 18-21, 2009 at The Mandalay Bay Resort & Casino. Attend and learn how to minimize your risk and determine profit and stop levels before every trade, enhance your trade accuracy using the latest tools and software, and look at charts and indicators to find opportunities you’ve previously missed. Discover these and other top trading strategies to increase your percentage of profitable trades in 2010. REGISTER FREE The Traders Expo is the one event this fall where you will learn everything you need to sharpen your trading edge. You will have opportunities to network with 50+ leading trading experts to find out what’s working for them (and what’s not) and attend educational presentations to learn expert strategies and techniques. Plus, you can evaluate the leading trading products and services available today from top companies in the state-of-the-art Exhibit Hall. While you’re at the conference, please join me for the following special presentation: The Truth about MACD Thursday, November 19 8:00am - 9:00am Jackie Ann Patterson   Discover complete Expo details, learn how to attend, and register FREE online. Or call 800/970-4355 and mention priority code 015487 .   With more than 125 in-depth workshops led by some of the best minds in the business, you are sure to expand your trading knowledge and gain strategies and techniques that you can put to use five minutes after leaving the conference (if not sooner), bringing you well on your way to increasing your profitability in current market conditions! You’ll hear from experts on a wide range of topics, from how to maximize your profits using money management and simple decision-making tactics for controlling your emotions, to understanding market psychology, and much more. You will also have the opportunity to look over the shoulders of top traders as they trade live! Whether they lose or profit, you’ll learn the thoughts behind the actions, so that you can gain an understanding of how successful traders approach today’s changing markets.  REGISTER FREE The Traders Expo Las Vegas is the ultimate opportunity to take a productive step back from the trading screen and gain a broader perspective by interacting with profitable trading experts. I look forward to seeing you there! Sincerely, Jackie Ann Patterson Editor, Back Testing Report Own Mountain Trading Company

Tags: free, MACD

In my previous post I mentioned that I found interesting videos from Adam Hewison.  Click here for a timely example which includes MACD divergence analysis of the S&P 500 near the end of the video.  (no registration required to view the video)

Tags: MACD, MACD divergence, SPY

People at the MoneyShow and elsewhere ask me, “why MACD?”

The short answer is that seeing how MACD Divergences pointed out some very good times to buy stocks and ETFs motivated me to want to use MACD.  So I learned the basics, made some good trades and a little money.   It wasn’t all roses however and taking a few too many losses prompted me to do all this backtesting.

You can see how the MACD divergence signaled good times to buy in this 10 min. video and summary about the SPY.

Since not everyone will want to take 10 min to watch the video, here’s a brief summary:

The MACD positive divergence in Oct 2002 and the one in March 2003 originally got me interested in MACD divergence.  In the TradeStation screenshot below, you can see the green MACD technical indicator at bottom showing a divergence as price hits a new low but the MACD does not confirm with its own new low.   This is a classic MACD divergence.    The dark green line is the backtesting strategy registering a profitable trade between Oct 2002 when it got the MACD bullish divergence buy signal and Sept 2003 when it got the MACD bearish divergence sell signal. Click the charts to enlarge them.

Another interesting MACD divergence on the SPY takes place in Aug 2004. The SPY had been choppy in a trading range when the MACD bullish divergence signaled that this Aug bottom might be different. Sure enough the SPY broke out of the range. See the TradeStation screenshot below of the trade taken by the backtesting engine.

What has the MACD divergence done for us lately?  Check out this chart of a MACD divergence catching a good time to buy in March 2009.  This most recent profitable trade on the SPY (green line in the chart below) comes on the heels of three attempts to find a bottom during the credit crisis that didn’t work out.    So you can see from this chart that nothing is perfect and you can’t expect every trade to be a winner.  In fact, this is a sample size of only one — SPY.   You should not rely on this to be representative of future performance.  

These charts and video show why I am interested in the MACD.    I want an objective signal of good times to buy like Oct 2002 and March 2009.  However, I learned the hard way that its not enough to just see a few good examples and then go trade.   This is the beginning of the research, not the end. 

Are you interested in using MACD to find good times to buy stocks and ETFs? If so, here’s three steps you can take today:

1. Find out the historical track record of various MACD divergence signals.   I recommend reading the TruthAbout MACD series from BackTesting Reports. You can either get the reports directly from this link, or visit the new truthaboutmacd.com for a free video and CD-ROM.   If you are serious about trading with the MACD, the performance data in the backtesting reports is a must-read.

2. Learn to recognize a MACD divergence when it happens at the right edge of the chart.  The BackTesting Reports have some example charts, and the “Power Tools” book has a chapter on the MACD, or get the original Master Class to see Gerald Appel explain the MACD himself.  

3. Get software to scan the market for MACD divergence conditions. These signals don’t come around all that often so it helps to be able to find them when/where they occur. The software I use to scan the US stock market for MACD divergence is available by clicking here.

( MACD stands for Moving Average Convergence Divergence.  SPY is the Exchange Traded Fund (ETF) of the S&P 500 which is often used as a proxy for the whole US Market.)

Updated 10/16/09 to fix typos.

Tags: ETF, MACD, MACD divergence, signal, SPY, strategy, TradeStation, trading

 Click Here to Watch Free ON-DEMAND Webcast from The MoneyShow

Tags: free, MACD, MoneyShow

See the press release at the link below for the full announcement:

http://www.prlog.org/10315826-backtesting-report-reveals-the-truth-about-macd-in-debut-at-the-moneyshow.html

Tags: MACD, MoneyShow

The July meeting of the Trade Station user group will be held at the Los Gatos High School’s community room on Saturday, July 11 at 10:00 am. Our speaker will be one of the members of our group, Jackie Ann Patterson.   Jackie is a stock trader and the editor of BackTesting Report.  She will give us a sneak preview of her Aug 2009 SF Money Show talk titled “The Truth About MACD”.  Drawing on her extensive backtesting of the MACD across 14 years of data on 7147 stocks, Jackie will highlight what worked and what didn’t, and reveal the top mistakes even the experts make when using MACD lines and histogram.   She will apply the lessons learned to several example charts, showing which buy/sell signals resulted in profits over 70% of the time plus how to do even better even with a lower win rate.    To take advantage of the most powerful MACD divergence signals, Jackie will demonstrate the semi-automatic process she uses to scan the markets for high-gain opportunities every evening.   We’ll do this with the latest end-of-day data so we can discuss whatever signals are active and current markets of interest to the audience.   

Hope you can attend this meeting.  Jim

Tags: MACD, MACD divergence, TradeStation

Mark your calendars to take advantage of my free educational presentations at the Money Show and Trader’s Expo.   More details to follow…

 In San Francisco, click the Money Show banner to register

Friday, Aug 21, 2009	06:00 PM - 06:45  PM	Get Green, Stay Green: Exit Strategies for Active Investors
Saturday, Aug 22, 2009	02:10 PM - 02:55 PM	The Truth About MACD

I’m also planning to present at the Traders Expo in Las Vegas, November 18-21, 2009. 

Tags: free, MACD, Money Show, Traders Expo