How To Find MACD Divergences Quickly and Easily

How to Scan the US Stock Market for MACD Bullish Divergences and MACD Bearish Divergences quickly and easily using StockFinder with add-in software from BackTestingReport.

Category:

Howto & Style

Tags:

• MACD
• MACD divergences
• scanning stocks
• screening stocks
• US stock market
• trading

[BackTestingReport]

The MACD (in yellow at the bottom) is not MACD H(istogram) as Elder plots it. It is the main MACD line itself plotted as a histogram -- something suggested by Gerald Appel.

In Appel's teachings about the MACD he shows lines as divergences even though they don't break the zero line. Therefore i didn't require it of the MACD scan.

For the MACDH scanner, yes, it requires breaking the back of the bear/bull ala Elder.

Good questions, thanks for asking!

[bunniesonprozac]

@NYredwhiteandblue

The problem I have with divergences is twofold. Firstly, even though MACD H may tick up after forming a higher low, price very often just continues on the downtrend before reversing (if it indeed does so). Stop placement is very tricky -too close and you're stopped out before the trend reverses, too far away and the risk-reward ratio negates the trade. Even worse on uptrends -without meaningful overhead resistance you may as well stick a pin in the chart for your stop.

[NYredwhiteandblue]

@bunniesonprozac I actually find RSI 14 divergences more reliable... I do use MACd however with multiple time frames for intraday trading. Of course you need to watch the Advancers vs decliners and ad volume. I also watch the vix, tick and trin.

[bunniesonprozac]

I'm confused. At 5:53, UUP, at the right edge, there's a 'buy' signal. Prices have sunk to a new low, but as Alex Elder explains, for there to be a proper bullish divergence, the histogram needs to have risen above the zero line "breaking the back of the bear" before making a higher low. This hasn't happened. Also, in the middle of the chart prices have made a lower low, but both MACD H and line have made much lower lows than the earlier splash of bearishness. Similar issues on other charts.