Technical Stock-Picking

link

Technical Stock-Picking: Make Your Move With the 'MACD'
Stockpickr Staff
02/15/08 - 05:36 PM EST
This technical analysis-based assignment was written by Stockpickr member Ira Krakow.

One of the most common problems that a stock technician faces is that not all buy or sell signals are genuine. A signal, such as a bullish candle on a one-minute candle chart, a stock price crossing its 20-day moving average, or the price touching the upper Bollinger Band, may be only a temporary blip. The very next minute, the price might reverse sharply. Placing a buy order relying on one indicator over a short time frame -- a "false positive" -- could result in a big loss. Enter the "MACD."

A Look at Capital One's Chart

Technicians use the MACD (Moving Average Convergence/Divergence) either to confirm the potential buy or sell decision (a "convergence") or to detect a false positive (a "divergence").

Here's a daily candle chart for Capital One Financial COF . . .