The MACD – or Moving Average Convergence Divergence – is a commonly used technical indicator. The MACD is a trend-following momentum indicator that measures the difference between two Exponential Moving Averages (EMA).
Simply put, when the MACD is rising it indicates that the 12 day EMA is trading above the 26 day EMA. This implies positive momentum. If this is above the ‘trigger line’ (the 9 day EMA) then the stock is considered bullish. If both lines are falling, the stock is under selling pressure.
The simplest interpretation of a bullish (bearish) moving average crossover occurs when MACD moves above (falls below) its 9-day EMA or ‘trigger line’. If a market is trending down but the ‘trigger line’ rises above the MACD, this implies that downward momentum is decreasing and there is a good chance that a reversal is imminent.