Forum Archive Index - June 2000

["Nigel Bree" <nbree@kcbbs.gen.nz>]

Julian Taylor wrote:
> could tell me the value of the macd graph ie convergence/divergence
> in predicting when to buy/sell.
> if it can be used this way, are there particular provisos
> that should be taken into account?

Have you read these useful articles? They discuss the signals that MACD
presents and how to use them, and the article at Stockcharts discusses
drawbacks of the approach.

MACD Histogram: Guidelines for Use
http://stocks.about.com/money/stocks/library/weekly/aa021100b.htm

Indicator Analysis: MACD
http://www.stockcharts.com/education/What/IndicatorAnalysis/indic_MACD1.html

> should it only be used in conjunction with other particular graphs?

What information to use in your decision is entirely up to you - these are,
after all, just tools. How to weight purely statistical indicators against
concepts such as support and resistance which are based more in market
psychology than time-series analysis depends greatly on how you feel about
them.

You also have lots of choices for time-frame. Some indicators are
longer-term, others shorter. What kind of trading strategy do you want to
adopt? Some stocks may be driven by large institutional holders who probably
do use exactly these technical analysis tools (and in doing so, help to make
the prophecies of the charts self-fulfilling - when the chart says sell, the
selling volume they introduce drives things down). Others may have a large
enough retail shareholder base to be driven by news instead.

> are there better graphs to use when to
> wanting to know when to buy/sell?

Probably the best thing for you to do is just try them out; pick a couple of
stocks to watch, chart a variety of indicators like MACD,
accumulate/distribute, and bollinger bands. Get used to reading them, see
which you can read the best, and see how much the signals lead or lag major
price movements. There is some voodoo in reading the chart signals like
resistance and in noticing divergence between the indicators and price
trends - simple practice will help.




----------------------------------------------------------------------------
http://www.sharechat.co.nz/          New Zealand's home for market investors
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/forum.shtml.