I would like to post this question. There are two images attached.I’m using the Triple Screen with the MACD 9 12 26 and the force index 13 periods. These indicators are going up on a weekly chart and don’t show any divergence or weakness. On a daily chart, however, these same indicators are drawing a shape common to most of the indexes and stocks I follow. See attached XFN as an example, the ETF of the Canadian financial sector.
I wonder how to analyze the chart in order to look for a trade. I also wonder when the divergence will be over in this example.
Thank you very much for your input.
I wonder how to analyze the chart in order to look for a trade. I also wonder when the divergence will be over in this example.
Thank you very much for your input.
Didier
Didier --
ReplyDeleteThis is a great question, and I hope a lot of people respond to it. I don't speak with any authority at all at this point, but if I were trying to anticipate the next week or so based on this chart, and I wanted to be cautious, I think I would take the second interpretation. I see the potential for a false upside breakout. Price moved up from the 1st to the 2nd arrow and hit a high, after a a one-day drop (sort of kangaroo tail), accompanied by declining MACD-H and FI. Then price deteriorated and dropped, culminating in another tail whose low was lower than the previous tail. Then price recovered and achieved a new high. Certainly the upturn in price and the indicators could signal an up move from here, but I just think that the rally is acting tired. I would want to wait a day or two to see if, for example, MACD-H ticked down again. Because I'm new and cautious I would likely take a wait-and-see approach.
Best regards,
Stephen A
Hi Didier -
ReplyDeleteSince I'm fresh from extensive research on MACD -- backtesting, reviewing trades, books, DVD classes -- I'll venture a comment here.
One of the striking features of MACD-H is that it is notorious for early sell signals. Also, it does "breathe-in, breathe-out", meaning fluxuate up and down even while the trend is still in place.
For the charts you posted, on the MACD-H, I wouldn't rate that as a negative divergence -- merely neutral behavior.
Now that FI - which I haven't particularly studied -- offhand that sure looks like it is running out of steam.
Best regards and hello to all Spikers,
JackieP.
Stephen and Jackie,
ReplyDeleteI agree with you. The second interpretation is the one I favour. However, I wonder when the divergence of the Force Index is over from a technical perspective: when it goes under the zero line after its two tops? If not, we can see it as a whole (not divided – 2nd interpretation) and therefore a third top is in progress, much lower than the previous ones.
Like Stephen said, I'm going to wait.
Jackie: I didn't know that the MACD was better or more suitable for sell signals rather than for buy signals.
I thank you very much for your input. Have a nice trading week.
Hi Didier-
ReplyDeleteI just want to clarify my late-night comments.
Per Gerald Appel's class and book, the MACD is best at identifying intermediate bottoms. Regarding sell signals (even using the MACD lines which are less sensitive than the particular MACD-H you are using) he advises tactics like slower settings and even skipping a signal because the sell signals often come too early.
So a MACD-H may tick down repeatedly before the trend is over.
Best wishes for your success,
Jackie