Moving Average Convergence Divergence

The MACD shows the difference between two exponential moving averages, I don’t use a “signal line” when I look at this indicator, just look at the oscillator. Yesterday I thought that as Google Inc. (Public, NASDAQ:GOOG) approached the rising 50 day moving average and the 50% rtracement level there was the potential for support in that area. The short term trend remains lower, however the hourly chart shown below is showing us signs of a potential turn. I stress that there is not proper stability on the shorter term trend to make a buy with confidence, but the MACD divergence is often one of the first signs that a stock is setting up for a tradable reversal that could last a couple of days. The lower low that GOOG made yesterday came on less volume and the selling was less intense than what the stock experienced on Tuesday (evidenced by the higher MACD level). The action on the daily timeframe (pullback to 50 dma & 50% retracement) leads us to drill down to the hourly timeframe where we see the MACD divergence which is a sign that sellers are less aggressive. Now for a low risk setup to materialize in shares of GOOG we need to take our analysis to shorter term timeframes to look for evidence that buyers are starting to become more aggessive and that they can take control.