Technical indicators such as the MACD use lines to generate buy and sell signals or suggest a change in a trend. Traders often avoid entering a position too early in the trend by waiting for a confirmed cross above the signal line. Signal lines are frequently used together with other technical analysis methodologies such as technical indicators, chart patterns, or candlestick patterns, to confirm trends. When the MACD falls below the line it signals bearish sentiment, suggesting it is time to think about selling. A rise above the line usually indicates an upward price movement and is a bullish signal.
Zero crossovers take place when the MACD line crosses the horizontal zero axis, meaning the difference between the series’ fast and slow EMAs has been eliminated. A change to a negative MACD is bearish, and the reverse is bullish. These zero crossovers can confirm a change in trend direction, but they offer less evidence of momentum than a signal line crossover.
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