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Chart Indicators
Chart Patterns

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Chart and Market Indicators
Chart and Market indicators used in conjunction with price charts, help the trader determine potential short term tops and bottoms in the market as well as the relative strength of price moves. Only the more common indicators will be discussed here. Check out Equis technical Glossaryfor a detailed listing and glossary of indicators.

Chart Indicators
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    The Moving Average Convergence Divergence (MACD), developed by George Appel, is a widely used lagging indicator showing investor sentiment in a stock. The MACD is calculated by subtracting the 26 Day EMA from the 12 Day EMA which is often refered to as the fast line. On top of the MACD a 9 day EMA of the MACD is usually added as a trigger, and is refered as the slow or smoothed line. A histogram may also be added which is the difference of the fast line (MACD) and the slow line (9 day EMA of MACD). This MACD is catagorized as 12-26-9, and many sites on the web allow user defined time variables (i.e Askresearch recomends use of an 8-17-9 MACD to time position entries and a 12-25-9 to time exits). There are two common uses of the MACD for market timing; divergences and crossovers.

      Divergence: A divergence occurs when the MACD is trending in one direction while the equity price trends in another. Look for divergences with the slow (9 dema smoothed) MACD and MACD histogram with price trend for entry and exit signals. Divergences usually imply that a trend change is near.

      Cross over: A cross over occurs when the MACD fast and slow line intersect. If the fast line interesects from below it's bullish, from above bearish. The closer the crossover occurs to the centerline the more significant the event.
      MACD by Arthur Hill

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