Bullish Divergence on the MACD

26 feb 2021

Beginner Friendly

I love to see bullish divergence on the MACD(moving average convergence divergence) indicator. It usually always makes a bullish cross to the upside :)

Bullish Divergence:
To put it simple, when price action is making lower lows while the MACD is making higher lows, its considered bullish divergence. This is a good indication that a trend reversal is about to happen. Of course no one indicator is 100% accurate, so make sure to also evaluate the sentiment of the market/stock. I like to pair this indicator with the RSI (relative strength index) to get a better idea on where I should position myself in the trade.

For example, lets take this PLTR chart:

• Price Action is falling (making lower lows)
  
  
• The MACD indicator is rising (making higher lows)
  
  
• There was a bounce off of the support line as the MACD is crossing up
  
  
• The RSI indicator is pretty low indicating that the stock is oversold
  
  
  These make great conditions for a trend reversal. I would only take this trade once the cross is complete because remember, no indicator is 100% accurate. As stated in my previous post, I wont be hopping into this trade until a trend reversal is signaled because the market is too mixed for me.
  
  I found a really awesome post that will help you understand different type of divergence's ---> Types Of Divergence
  
  Thanks for reading, leave a comment and me know what you think!