Monday, December 8, 2008

MACD Divergence To Spot Nice Long Swing Trades


5 comments:

Salsaman said...

Does that really count when it has been positive macd since october 18th?

Stewie said...

hi salsa, i think the macd positive diverngeces trades are working right now is b/c now we later forced selling where non of the indicators were working. also, just because you have a divernce, that doesn't guarantee a good trade. once i noticed that the selling has subsided, then i started to notce tons of these divengences and in some cases the divergances were very severe such as in the case of DRYS. so i figured that once the hedge fund margin selling eases off, these stocks would be screaming buys at some point. hope that helps a bit.

Anonymous said...

Do you have a screening setup that helps you find these examples?

Thanks!

sloth said...

This may or may not be of help: with DRYS, the MACDh (histogram) has mostly been postitive, yes, it dipped back negative briefly then has stayed positive. HOWEVER the selling was continuing until end of NOV while the MACD indicator lines have been sloping up, hence the divergence.

Where Stewie has underlined the MACD indicator lines we see the price action is sideways, yet the emas (which is what MACD is based on) are "coming down".

Price moving down slower with consolidation is definately a good sign, especially with vol still maintaining above avg buy lvls.

ALSO you can look for patterns in MACD and use them in the same manner you would price action patterns, and DRYS is forming a semi decent C&H in the MACD..

All this is about price action and that it is indeed stabilizing while the vol is fairly heavy in relation to the previous selling months.

Now if we can just consolidate a bit under that 20ema we should see continued strength, of course the trick is where to enter, and I bet is somewhere just just above the 5.00 mark.. That would be ideal for me to go long as long as the vol remains around 6-7mil.

If tomorrow it opens just above the middle line of the true body I would walk into a position.

Long winded and lots of ifs and uhs, but see how Stewie and others feel about what I have to say and as always protect your $

-sloth

BABY TRADER said...

Stewie, the volume on the DRYS chasrt is wrong I think....my chart says DRYS had a monster volume day of over 26 million shares which makes it even more interesting!

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