Sunday, December 22, 2013

What comes first in a chart, Volume or Momentum?

For this discussion I am using MACD and Volume, we know what Volume is.

MACD – Basic

The most simple momentum oscillator, this indicator uses two moving average (I use them as an alternative for trend lines at times). Momentum change happens as there are consecutive breakouts or breakdowns of any trend lines. So that’s how momentum is measured.
MACD Line: (13-day EMA - 21-day EMA)
Signal Line: 8-day EMA of MACD Line
MACD Histogram: MACD Line - Signal Line

The math was simple ain’t it?
MACD – the convergence occurs when the moving averages move towards each other and the divergence occurs when the moving averages move away from each other. It is an oscillator because it oscillates above and below the zero line.
Any Momentum indicator that you like to use, either RSI or MACD can be applied in the RSI new high trick that was discussed earlier.
There is a difference between RSI and MACD.
MACD cannot have an upper limit, while RSI can have. Why is this important? We will discuss this using TSLA.

You can use these tricks, in conjunction with the Market or the Sectors. Make sure you are playing in the Market or Sector direction.

From the above chart, we can see what can be used for hunting the tickers. Hunting with the momentum based indicators puts in the odds of getting in early. 

GL all. Merry Christmas and Happy New Year. 

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