MACD Positive Divergence - A Successful Technical Stock Pattern

Mar. 13, 2010 1:13 PM ETATVI, EA, T, GMRRQ
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Contributor Since 2010

I have more than 10 Yr experience in Stock Market Research. My expertise include both fundamental analysis and technical analysis of stock market. My company,'s mission is to simplify your search for good investment grade stocks. With hundreds of brokers and analysts churning out thousands of data points every day, an average investor may not have enough tools to analyze this clutter. We have build a system for analyzing market data using 12 categories of stock pick and consolidated them in 3 simple steps. pays equal attention to technical stock patterns, as these patterns determine a reasonable entry point in the stock market. One of our favorite indicator is MACD. We are not talking about usual MACD crossovers at the zero point or baseline.

Moving average convergence divergence (MACD), invented in 1979 by Gerald Appeal, is one of the most popular technical indicators in trading. MACD is appreciated by traders the world over for its simplicity and flexibility because it can be used either as a trend or momentum indicator.

Positive Divergence is when the MACD makes a higher low but the market makes a lower low. This situation gives us a hint of a possible reversal to the upside. The other situation is Negative Divergence and is noted when the MACD makes a lower high while the market makes a higher high. This situation gives us a hint of a possible reversal to the downside.

Click here to see a complete list of stocks making MACD positive divergences.

Positive divergences are very successful patterns for trend trading, however advises you to make your final stock selection based on other fundamental criteria and use technical patterns to enter trade.

We have carefully selected stocks from last 120 days of pattern formation.

One of our favorite stocks in this list is ATVI.

ATVI (Activision Blizzard): In early November 2009, ATVI made lows on both MACD and Price. Since then, ATVI hit 52 week low in Feb 2010; but, interestingly enough, MACD kept inching up during this period. Currently, this stock has crossed MACD baseline and subsequently hit the first resistance. However, from a technical standpoint, we expect this stock to go further up from this point onward. Since 02/10, the S&P 500 index has returned around 6.5%, and again, ATVI saw about a 10.33% gain during that time. ATVI also has a strong buy rating from all market analysts.

sincerely,  Team

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