The MACD indicator says: Buy Tesla stock, Buy JP Morgan stock and Sell Walt Disney Stock.
The Moving Average Convergence Divergence (MACD) is an important trend following popular momentum indicator used by technical chartists. The MACD indicator can be used to identify buy/sell signals in the market and today’s most popular stocks with MACD signals included the likes of electric car maker Tesla Inc (NASDAQ:TSLA), the house of mouse Walt Disney (NYSE:DIS) and New York based financial services and banking giant JP Morgan Chase (NYSE:JPM). As detailed by Investopedia, “The MACD is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA of the MACD, called the “signal line”, is then plotted on top of the MACD, functioning as a trigger for buy and sell signals.” So, what exactly are the MACD signals coming through and how should investors interpret them?
MACD says bulls are in control of Tesla stock
Tesla is among the most popular stocks on Wall Street with either extremely loyal bulls or very pessimistic bears. When speaking of Tesla, it’s hard to find some middle ground. The MACD indicator broadly generates three types of indicators: crossovers, divergence or a dramatic rise (in the MACD). Crossovers can be either centerline crossovers or MACD crossovers. In context of Tesla stock, the TSLA technical chart registered a bullish centerline crossover, which saw the Tesla stock MACD rise above the center line. This indicates that the shorter term average is above the long term average, indicating that the momentum in the name is rising. The bullish centerline crossover indicates that the recent uptrend in Tesla stock might continue for the next few trading sessions.
A Bullish MACD Crossover Could Lift JP Morgan Higher
Apart from the centerline crossovers detailed above, the MACD indicator also generates MACD crossovers. And how are these different from the centerline crossovers and how should investors interpret them? When the MACD falls below the signal line, the MACD crossover is viewed as a bearish signal. Conversely, a rise of the MACD above the signal line is a bullish indicator, and this bullish MACD indicator is precisely what the JP Morgan chart flashed in the last trading session. The MACD on the JP Morgan technical chart rose above the signal line after being below the signal line for nearly a month. In light of the bullish MACD crossover, investors should expect the recent earnings-fuelled momentum on the JP Morgan counter to continue for a while.
It is time to sell Disney Stock, Says MACD.
The third major MACD signal for today comes from the Disney stock technical chart. The House of Mouse is due to announce its Q3 2017 earnings after the market close today (August 8). As we had noted in our Disney Q3 earnings preview, ESPN, caught in the midst of the cord-cutting trend, will be in the focus again. While we believe Disney is a good buy, the ESPN woes notwithstanding, the technical chart hasn’t been too encouraging in the lead up to the earnings announcement. The MACD indicator flashed a bearish MACD crossover in the most recent trading session, which saw the MACD fall below the signal line. If Disney fails to smash past investor expectations, Disney stock could well continue on its recent downtrend, which has seen the stock fall from $110 levels at the start of the month, to close the last trading session at a price of $106.35 a share.
If you’re looking for more such technical trading ideas, check out our daily trading ideas section, which also features buy/sell signals from other technical tools/indicators.