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A Technical Approach To Trend Analysis: Practical Trade Timing for Enhanced Profits by Michael C. Thomsett

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Moving Average Convergence Divergence (MACD)

RSI provides a readily recognizable single index value, whereas moving average convergence divergence (MACD) involves three different moving averages. Its value is in its tracking of an ongoing trend and in the way it signals that a current trend has weakened and is coming to an end.

Developed by Gerald Appel in the 1970s, MACD uses its three “time series” calculations based on the closing price. The first two are a fast EMA (12 days of closing prices) and a slow EMA (26 days of closing prices). The third is a signal line EMA of the last nine sessions. Several values of MACD include the divergence between the two EMA lines, the movement of both EMA signals above or below the signal line, and the degree ...

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