MACD (moving average convergence divergence) is a momentum oscillator which has been developed in the late seventies by Gerald Appel and is used to show relationship between two moving averages of price.
The MACD is calculated by subtracting the 26-day exponential moving average (EMA) from the 12 day EMA. The second line that is plotted is the ‘signal’ line which is a 9 day moving average of the MACD and will thus lag behind
The MACD oscillate, without boundaries, above and below the zero line as the moving averages converge, cross and diverge.
How does it work?
MACD crossing above zero is considered as bullish, while crossing below is considered bearish.