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Stocks & Commodities V. 35:12 (10–15, 41): Weekly & Daily MACD by Vitali Apirine

Copyright © Technical Analysis Inc. www.Traders.com


Stocks & Commodities V. 35:12 (10–15, 41): Weekly & Daily MACD by Vitali Apirine
INDICATORS

Hey Trend, How Strong Are You?

Weekly & Daily MACD


The moving average convergence/divergence oscil- The values of 60, 130, 12, and 26 are the typical set-
lator (MACD), developed by Gerald Appel, is one of tings used with the W&D MACD. However, other
the more popular technical analysis indicators. The values can be substituted depending on your trading
MACD is typically used on a single timeframe, but style and goals. The MetaStock code for the W&D
what if we looked at two timeframes on one chart? MACD can be found in the sidebar “MetaStock Code

T
For W&D MACD.”
he indicator I’ll discuss in this article, the In Figure 1 you see an example of a chart with the
weekly & daily MACD (W&D MACD), weekly & daily MACD indicators in the upper panel.
combines (as you may have guessed) weekly Notice the W&D MACD consists of two oscillators.
and daily MACD oscillators on a daily chart. Each The weekly MACD oscillates above and below the
oscillator turns two moving averages into a momentum zero line (centerline). These crossovers signal the
oscillator by subtracting the longer moving average 60-day EMA crossing the 130-day EMA. The direc-
from the shorter moving average. Traders can look tion depends on the direction of the moving average
for relative daily MACD line crossovers, weekly cross. Positive weekly MACD indicates the 60-day
and daily centerline crossovers, and divergences to EMA is above the 130-day EMA. Positive values
generate trading signals. Because the W&D MACD increase as the shorter EMA diverges further from
is not bounded, it is not particularly useful for iden- the longer EMA.
tifying overbought and oversold levels. Here’s how Negative weekly MACD values indicate the 60-day
you calculate it. EMA is below the 130-day EMA. Negative values
increase as the shorter EMA diverges further below
Calculation the longer EMA.
1. Multiply daily exponential moving aver- The relative daily MACD fluctuates above
age (EMA) lengths by 5 (five days per
week) to get weekly EMAs.
12-day EMA * 5 = 60-day EMA = 12-week Relative
Daily MACD
EMA Weekly
MACD
26-day EMA * 5 = 130-day EMA = 26-week
EMA

2. Weekly MACD line:


(60-day EMA - 130-day EMA)

3. Calculate daily MACD line:


(12-day EMA - 26-day EMA)
Metastock
PATRICK KELLEY

4. Relative daily MACD line: FIGURE 1: Weekly & Daily MACD indicators. The weekly & daily MACD
Weekly MACD line + Daily MACD line indicators are displayed in the upper panel. Notice the W&D MACD consists of two
oscillators. The weekly MACD oscillates above and below the zero line (centerline)
and the relative daily MACD fluctuates above and below the weekly MACD line.

by Vitali Apirine

Copyright © Technical Analysis Inc. www.Traders.com


Stocks & Commodities V. 35:12 (10–15, 41): Weekly & Daily MACD by Vitali Apirine

Figure 2: a strong uptrend. On this chart, you see a bullish relative daily MACD FIGURE 3: A STRONG DOWNTREND. Here you see four relative daily MACD line cross-
line crossover in early September 2010 and a bearish relative daily MACD line crossover overs in seven months. The weekly MACD line was negative and dropped, except from
in mid-March 2011. This bullish signal lasted seven months. Notice the weekly MACD second half of August to the first half of September.
line rose most of the time.

and below the weekly MACD line. The relative daily The relative daily MACD is faster. The weekly MACD line
MACD crossover signals the 12-day EMA has crossed the 26- is slower and less reactive to price changes in the underlying
day EMA. The direction depends on the direction of the moving security.
average’s cross. The relative daily MACD is positive when it is
above the zero line. The relative daily MACD is negative when Relative daily MACD line crossovers
it is below the zero line. A bullish crossover occurs when the relative daily MACD line
When the relative daily MACD is below the weekly MACD turns up and crosses above the weekly MACD line. This hap-
but above the zero line, it means daily downside momentum pens when the 12-day EMA of the underlying security moves
outpaces daily upside momentum, but there is less weekly upside above the 26-day EMA. A bearish crossover occurs when the
momentum. So, positive difference between 60-day and 130- relative daily MACD line turns down and crosses below the
day EMA is greater than negative difference between 12-day weekly MACD line. This happens when the 12-day EMA moves
EMA and 26-day EMA. If the relative daily MACD is below below the 26-day EMA. Crossovers can last a few days or a few
the zero line (negative) and weekly MACD is above the zero weeks. It depends on the strength of the move.
line (positive), it indicates a whipsaw in the daily MACD or a The chart in Figure 2 shows NYSE Composite index (NYA)
signal of a future change of weekly momentum. If the weekly with a bullish relative daily MACD line crossover in early Sep-
MACD is above the zero line and relative daily MACD is above tember 2010 and a bearish relative daily MACD line crossover
the weekly MACD, it indicates weekly upside momentum and in mid-March 2011. This bullish signal lasted seven months.
daily upside momentum outpacing weekly downside momentum It indicates that the 12-day EMA was above the 26-day EMA.
and daily downside momentum, respectively. The most profit- Weekly MACD line became positive at the end of September
able long trade occurs when the weekly MACD and relative 2010 (60-day EMA crossed above 130-day EMA). Notice the
daily MACD rise together. weekly MACD line rose most of the time. This was one strong
When the relative daily MACD is above the weekly MACD uptrend.
but below the zero line, it means daily upside momentum out- In Figure 3 is a chart of London Financial Times index (FTSE
paces daily downside momentum, but it is less weekly downside 100) with four relative daily MACD line crossovers in seven
momentum. In other words, a negative difference between 60- months. The weekly MACD line was negative and dropped,
day EMA and 130-day EMA is greater than positive difference
between 12-day EMA and 26-day EMA. If the relative daily
MACD is above the zero line (positive) and the weekly MACD is
below the zero line (negative), it is possible that the daily MACD
did whipsaw or signaled future change of weekly momentum. If The most profitable long
the weekly MACD is below the zero line and the relative daily trade occurs when the weekly
MACD is below the weekly MACD, it indicates both weekly MACD and relative daily MACD
downside momentum and daily downside momentum outpace
weekly upside momentum and daily upside momentum, respec- rise together.
tively. The most profitable short trade occurs when the weekly
MACD and relative daily MACD drop together.

Copyright © Technical Analysis Inc. www.Traders.com


Stocks & Commodities V. 35:12 (10–15, 41): Weekly & Daily MACD by Vitali Apirine

except from the second half of August to the first half of Sep-
Compare Daily MACD Centerline Crossovers with Relative Daily MACD Line Crossovers
tember. The bearish crossovers worked well because this was
resistance break one strong downtrend.

Daily MACD line crossovers


vs. centerline crossovers
In Figure 4 is a chart of the S&P 500 index (SPX) with daily
Eight daily centerline crossovers
(red and green dotted lines) in eight months MACD (12, 26, 1) and W&D MACD (60, 130, 12, 26). Eight
crossovers in eight months would have resulted in numerous
whipsaws. A break in the resistance level in early November 2004
signaled the correction’s end and the uptrend’s continuation.
Weekly centerline crossovers
(red and green ellipses)
Notice the weekly MACD line declined from March to
August, briefly crossed the weekly centerline from August to
September (see red and green ellipses), and started to rise again.
This shows that weekly MACD signals are more important than
FIGURE 4: Daily macd line crossovers vs. centerline crossovers. There daily MACD signals.
was a lot of whipsaw movement going on here until the index broke above the resistance
level. This break signaled the continuation of the uptrend.
W&D MACD centerline
crossovers
Centerline crossovers are common W&D
MACD signals. A weekly bullish centerline
crossover occurs when the weekly MACD
line moves above the zero line to turn posi-
tive. This happens when the 60-day EMA
of the underlying security moves above the 130-day EMA. A
resistance break weekly bearish centerline crossover occurs when the weekly
MACD line moves below the zero line to turn negative. This
happens when the 60-day EMA moves below the 130-day
EMA.
A daily bullish centerline crossover occurs when the relative
daily MACD line moves above the zero line to turn positive. A
daily bearish centerline crossover occurs when the daily MACD
line moves below the zero line to turn negative. A continuation
FIGURE 5: W&D macd centerline crossovers. Strong trading signals are hard
of centerline crossovers depends on the trend’s strength.
to come by during a choppy market. During such times, you can combine W&D MACD In Figure 5 you see a chart of the S&P 500 index (SPX) with
centerline crossovers with relative daily MACD line crossovers. Here you see a resistance W&D MACD (60, 130, 12, 26). The relative daily MACD line
break in early July 2016 that confirmed the daily MACD line bullish centerline crossover crosses the centerline faster than the weekly MACD line. There
in mid-March 2016 (green ellipse) and weekly MACD bullish centerline crossover in early
April 2016 (black ellipse).
were some good and some bad signals during the consolidation
from August 2015 to July 2016. In a choppy market, you can
combine W&D MACD centerline crossovers with relative daily
MACD line crossovers. A resistance break in early July 2016
05/03/2005
07/14/2006 08/20/2007 confirmed the daily MACD line bullish centerline crossover in
08/05/2004 mid-March 2016 (see green ellipse) and weekly MACD bullish
centerline crossover in early April 2016 (see black ellipse). It
signaled the end of the consolidation and continuation of the
uptrend. Notice the weekly MACD line rose after the April
centerline crossover.
05/12/2003 09/28/2004 06/06/2005 09/21/2006

Weekly W&D centerline crossovers vs.


weekly centerline crossovers
The daily chart in Figure 6 shows the Russell 2000 in-
dex with W&D MACD (130, 60, 1, 1). The weekly chart
(Figure 7) shows the same index with MACD (12, 26, 1).
Both charts are of the same time period (March 2003 to August
FIGURE 6: daily chart of Russell 2000 INDEX WITH W&D MACD(130,60, 2007). The centerline crossover dates can be seen in the table in
1, 1) Figure 8. The biggest difference was in June 2005 (four business

Copyright © Technical Analysis Inc. www.Traders.com


Stocks & Commodities V. 35:12 (10–15, 41): Weekly & Daily MACD by Vitali Apirine

days) and September 2006


W&D MACD Weekly MACD
07/14/2006 08/17/2007 (six business days).
04/29/2005 05/12/2003 05/09/2003
Weekly W&D
08/06/2004

08/05/2004 08/06/2004 MACD divergence


Weekly divergences  form
09/28/2004 10/01/2004
05/09/2003 10/01/2004 06/10/2005 09/29/2006
when the weekly W&D
05/03/2005 04/29/2005 MACD line diverges from
the price action of the un-
06/06/2005 06/10/2005 derlying security. A bullish
07/14/2006 07/14/2006 divergence forms when a
security records a lower
09/21/2006 09/29/2006 low and the weekly W&D
MACD line forms a higher
08/20/2007 08/17/2007
low. The lower low in the
FIGURE 7: weekly chart OF RUSSELL 2000 INDEX With MACD(12,26,1) FIGURE 8: CENTERLINE CROSSOVER security affirms the current
DATES. The centerline crossover dates downtrend, but the higher
from the charts in Figures 6 & 7 are
listed. low in the weekly W&D
MACD line shows less
lower Weekly
high centerline
crossover weekly downside momen-
tum. A bearish divergence forms when a security records a
higher high and the weekly W&D MACD line forms a lower
high. The higher high in the security affirms the current uptrend,
Weekly Bearish Divergence

but the lower high in the weekly W&D MACD line shows less
higher high weekly upside momentum.
In Figure 9 you see a chart of the S&P 500 index (SPX) with
a weekly bearish divergence from July to October 2007. Weekly
W&D MACD formed a lower high as the index formed a higher
support break high in October. The weekly W&D MACD turned down with a
weekly centerline crossover at the end of December. SPX con-
firmed a reversal with support breakout in early January 2008.
The chart in Figure 10 shows a bullish divergence from
FIGURE 9: weekly bearish divergence. Weekly W&D MACD formed a lower high
November 2008 to March 2009 in the Dow Jones Industrial
as the index formed a higher high in October. The weekly W&D MACD turned down with Average (DJIA) during a bear market. The index forged a lower
a weekly centerline crossover at the end of December. SPX confirmed a reversal with low but the weekly W&D MACD formed a higher low. The
support breakout in early January 2008. subsequent weekly W&D MACD centerline crossover and DJIA
resistance break were bullish in late July 2009.

Daily MACD and relative daily


W&D MACD divergence(s)
Daily MACD bearish divergences are normal during strong
higher high
uptrends while daily bullish divergences often occur in strong
Weekly Bearish Divergence
downtrends. Bearish divergence means decrease of upside
momentum. Despite less upside momentum, upside momentum
Bear Market is still outpacing downside momentum as long as the daily
MACD remains in positive territory. Relative daily MACD
upside momentum is outpacing daily downside momentum
resistance break when relative daily MACD is above the weekly MACD. The
opposite occurs at the beginning of a strong downtrend.
The chart in Figure 11 shows the S&P 500 index (SPX)
with daily MACD(12, 26, 1) and W&D MACD (160, 130, 12,
26) for comparison. The daily MACD formed four bearish
lower low

divergences from August to November 2009. The relative


FIGURE 10: bullish divergence. The index forged a lower low but the weekly W&D
MACD formed a higher low. The subsequent weekly W&D MACD centerline crossover
daily MACD made only one bearish divergence from October
and DJIA resistance break were bullish in late July 2009. to November. Notice the relative daily MACD was well above
the centerline and weekly MACD line was almost flat during

Copyright © Technical Analysis Inc. www.Traders.com


Stocks & Commodities V. 35:12 (10–15, 41): Weekly & Daily MACD by Vitali Apirine

crossovers, rela- Metastock Code for W&D MACD


tive daily MACD
Four bearish divergences
Length1:=60;
crossovers, and Length2:=130;
daily MACD di- Length3:=12;
One bearish divergence vergences. The rel- Length4:=26;
ative daily MACD
generates fewer di- WM:=Mov(C,Length1,E)-Mov(C,Length2,E);
vergences than the DM:=Mov(C,Length3,E)-Mov(C,Length4,E);
daily MACD dur-
ing strong trends. WM;
WM+DM;
W&D MACD does
not have any upper
or lower limits and
its values are dependent on the underlying security’s price. It
is not possible to compare W&D MACD values for a group of
FIGURE 11: Daily MACD and relative daily W&D MACD Divergence. The securities with varying prices. There’s another indicator for
daily MACD formed four bearish divergences from August to November 2009. The relative that called the W&D percentage price oscillator (W&D PPO),
daily MACD made only one bearish divergence from October to November. The index
continued higher since the uptrend was strong.
which I will discuss in a future article.

this daily divergence. The index continued higher since the Vitali Apirine is a programmer engineer with an interest
uptrend was strong. in technical analysis, especially the application of relative
strength index to trading. He may be reached at vitapirine@
Putting it all mediacombb.net.
together
W&D MACD combines weekly and The code given in this article is available in the Article Code section
daily MACD signals. The standard of our website, www.Traders.com.
settings for W&D MACD are the
differences between the 60- and See our Traders’ Tips section beginning on page 50 for commentary
130-day EMAs and between the and implementation of Apirine’s technique in various technical
12- and 26-day EMAs. The daily analysis programs. Accompanying program code can be found in
MACD oscillates above/below the Traders’ Tips area at Traders.com.
the weekly W&D MACD. The
weekly W&D MACD fluctuates Further reading
above/below the zero line. Weekly Apirine, Vitali [2017]. “Moving Average Stochastic,” Technical
centerline crossovers are less frequent than relative daily Analysis of Stocks & Commodities, Volume 35: May.
MACD crossovers and daily MACD centerline crossovers. [2016]. “Higher Highs & Lower Lows,” Technical Analy-
Weekly W&D MACD centerline crossovers on daily charts sis of Stocks & Commodities, Volume 35: February.
are close to MACD centerline crossovers on weekly charts. Murphy, John J. [1999]. Technical Analysis Of The Financial
In John J. Murphy’s book Technical Analysis Of The Financial Markets, Prentice Hall Press.
Markets he points out that signals on weekly charts are more ‡MetaStock
important than those on daily charts. ‡See Editorial Resource Index
Weekly MACD centerline crossovers and weekly diver-
gences are more important than relative daily MACD centerline

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