(2) MarketWarrior and MACD

Written by:
Patrick Mikula CTA
Mikula Forecasting Company
www.MikulaForecasting.com
support@MikulaForecasting.com
Copyright © 2008 by Patrick Mikula All Rights Reserved.

The next unique application for the Moving Average Convergence Divergence (MACD) that I will discuss occurs when the MACD histogram moves into a tight sideways band. The chart below is a 1 minute chart for Apple, symbol AAPL from July 16, 2008. On this chart I have used the letter “A” to mark where the MACD started moving in a very tight band close to zero. I have used the letter “B” to make where this tight band ended. When the MACD moves in a tight band very close to zero it is an indication that a market breakoutt is coming.

MACD 2

The chart below is an extension of the Apple chart seen above. The letter “B” is the same letter “B” from the previous chart, it marks where the MACD histogram ended a tight band close to zero. You can see on the chart below that after the tight sideways band in the MACD histogram ended the market had a string upward breakout. When you see the MACD behave like this you should wait to trade the breakout.

MACD 3

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MarketWarrior and MACD

Written by:
Patrick Mikula CTA
Mikula Forecasting Company
www.MikulaForecasting.com
support@MikulaForecasting.com
Copyright © 2008 by Patrick Mikula All Rights Reserved.

I am going to discuss a couple of unique applications for the Moving Average Convergence Divergence, (MACD) which was developed by Gerald Appel. The traditional uses for this indicator are Bullish Divergence and Bearish Divergence but I will not be discussing these two applications. The chart below is a 1 minute chart for Costco, symbol COST from Wednesday, July 16, 2008. When watching the main histogram in the MACD there will be times when an upward move is strong and the low point between two tops in the MACD histogram stays above zero. When this occurs it is a very good signal that the up move will continue. On this chart I have labeled two times when this occurred as “A” and “B”. In both situation the low point between two tops on the MACD histogram was above zero. Both “A” and “B” are times when you would want to buy this market.

MACD 1

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