MACD

From Reuters Financial Glossary

Synonyms: Moving Average Convergence, Moving Average Divergence

Moving Average Convergence/Divergence is technical analysis tool showing the relationship between two exponential moving averages of a share price for different periods. The two exponential moving averages are plotted on a chart, producing two lines that oscillate above and below a zero line. Sell and buy signals are generated when the two lines derived from moving averages of different periods cross. Overbought and oversold signals can be indicated when both lines are significantly above or below the zero line respectively. The exponential moving average is worked out by applying a percentage of the closing price today to the moving average calculated yesterday. This gives more weight to the most recent price changes compared with a simple moving average.

See also: Analysis