Understanding Indicators

MACD (Moving Average Convergence Divergence)

The Trend and Momentum Combo

MACD is a versatile indicator that shows both trend direction and momentum. It's calculated using the difference between two EMAs and is one of the most reliable indicators available.

MACD Components

MACD Line = 12 EMA - 26 EMA
- Shows the relationship between short and long-term momentum

Signal Line = 9 EMA of MACD Line
- A smoother version for generating signals

Histogram = MACD Line - Signal Line
- Visual representation of momentum strength

MACD Signals

Crossovers:
- MACD crosses ABOVE signal line → Bullish (buy signal)
- MACD crosses BELOW signal line → Bearish (sell signal)

Zero Line:
- MACD above 0: Overall bullish momentum
- MACD below 0: Overall bearish momentum

Histogram:
- Growing histogram: Momentum increasing
- Shrinking histogram: Momentum weakening

MACD: 0.25, Signal: 0.15, Histogram: 0.10 MACD > Signal = Bullish ✓ MACD > 0 = Bullish momentum ✓ Histogram positive = Buyers in control ✓

All three components align bullish

MACD Divergence

Like RSI, MACD can show divergences:

- Price higher high + MACD lower high = Bearish divergence
- Price lower low + MACD higher low = Bullish divergence

MACD divergences are especially powerful at trend extremes.

SUTOK tracks MACD crossovers as separate high-priority signals. A MACD bullish crossover adds +2 to your analysis score.

MACD is a lagging indicator - crossovers confirm moves that already started. In choppy markets, it can generate false signals.

Key Takeaways

  • MACD shows trend direction AND momentum
  • MACD crossing above signal line = buy signal
  • MACD above zero = bullish; below zero = bearish
  • MACD divergences signal potential reversals