GLOSSARY // Technical Analysis
MACD
MACD (moving average convergence divergence) is a momentum indicator built from three EMAs: the MACD line is the 12-period EMA minus the 26-period EMA, the signal line is a 9-period EMA of the MACD line, and the histogram plots the gap between the two. Standard notation is 12/26/9.
Three readings come off the same plot. MACD line above zero means the 12-period average is above the 26-period, a medium-term uptrend condition. MACD crossing the signal line flags a momentum turn. And the histogram shrinking while price pushes to new extremes shows momentum fading before the crossover confirms it.
MACD is a derivative of moving averages, so it inherits their lag and their whipsaw problem in sideways markets. In chop, the lines cross back and forth constantly and the signals are close to coin flips; the indicator earns its keep in trending tape.
A stock's 12-day EMA sits at 52.40 and its 26-day EMA at 51.20, putting the MACD line at +1.20 with the signal line at +0.85 and the histogram at +0.35. Over the next two weeks price grinds from 53 to 54 but the histogram shrinks to +0.05. The MACD line then crosses below the signal at +0.60, and the stock pulls back to 50.
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Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.