MACD (Moving Average Convergence Divergence)

A trend-following momentum indicator showing the relationship between two moving averages.

What Is MACD?

The Moving Average Convergence Divergence (MACD) is one of the most popular and reliable technical indicators used by traders and analysts. It reveals changes in a stock's momentum, direction, and strength by measuring the relationship between two exponential moving averages (EMAs).

The standard MACD uses the 12-period and 26-period EMAs. The MACD line is calculated by subtracting the 26-period EMA from the 12-period EMA. A 9-period EMA of the MACD line serves as the "signal line."

Reading the MACD

• MACD above signal line: Bullish momentum. Consider buying or holding.
• MACD below signal line: Bearish momentum. Consider selling or staying out.
• MACD crossing above zero: The short-term trend is turning bullish. Strong confirmation signal.
• MACD divergence: When the stock makes a new high but MACD makes a lower high, it's a bearish divergence — warning that the trend may be weakening. This is one of MACD's most powerful signals.

MACD Before Earnings

The MACD can provide valuable context for earnings predictions. A stock entering earnings with positive MACD momentum (above the signal line and rising) is showing underlying strength that may continue if earnings are favorable. Conversely, a stock with bearish MACD momentum may be more vulnerable to a post-earnings selloff even with in-line results.