MACD tracks the relationship between two exponential moving averages to reveal trend direction, momentum, and potential reversal points. It's one of the most widely used momentum indicators.
MACD Line: 12-day EMA minus 26-day EMA.
Signal Line: 9-day EMA of the MACD line (smoother).
Histogram: MACD Line minus Signal Line (shows momentum speed).
When MACD is above zero, the short-term trend is above the long-term trend -- bullish. Below zero means the opposite.
Bullish crossover: MACD line crosses above the signal line.
-> Short-term momentum accelerating upward.
Bearish crossover: MACD line crosses below the signal line.
-> Short-term momentum turning downward.
Crossovers near the zero line are stronger signals than those far from it.
Growing histogram bars = momentum is accelerating in that direction.
Shrinking bars = momentum is fading (often happens before a crossover).
Watch for histogram bars shrinking while price continues -- that's a warning that the move may be running out of steam.
Related: RSI -- Relative Strength Index • Moving Averages (MA20, MA50, MA200) • Volume Analysis