Thread: TA Method...is this a good one?

I found this suggestion for monitoring TA of stocks on the IHUB board...I wonder if anyone here finds merit to the method explained below:

"a good rule is go LONG or SHORT when you get a crossover on both the MACD(9-12-26) and stochastics d%3-k%14 at the same time or around the same time, and the lines should have a good space between them which defines a bullish or bearish move so they cannot stick together."

You can review the MACD lesson we have here, http://www.stockhideout.com/stock-sc...indicator.html

But yes when the MACD line crosses above its signal line in conjunction with the full stochastic line, then thats just 2 confirmations.

Great! Thanks! Will do!!!

MACD generates bullish signals from 3 main sources:
1 - Positive Divergence
2 - Bullish Moving Average Crossover
3 - Bullish Centerline Crossover

1- Positive Divergence (least common but most reliable)
MACD begins to advance and the security is still in a downtrend and makes a lower reaction low.
MACD can either form as a series of higher Lows or a second Low that is higher than the previous Low, and lead to the biggest moves.

2 - Bullish Moving Average Crossover (most common but least reliable)
MACD moves above its 9-day EMA, or trigger line.
If not used in conjunction with other technical analysis tools, these crossovers can lead to whipsaws and many false signals.
Bullish Moving Average Crossovers are used occasionally to confirm a positive divergence.
A positive divergence can be considered valid when a Bullish Moving Average Crossover occurs after the MACD Line makes its second "higher Low".
It is prudent to apply a price filter to the Bullish Moving Average Crossover to ensure that it will hold. An example of a price filter would be to buy if MACD breaks above the 9-day EMA and remains above for three days. The buy signal would then commence at the end of the third day.

3 - Bullish Centerline Crossover (indicates a change from bearish to bullish)
MACD moves above the zero line and into positive territory.
This is a clear indication that momentum has changed from negative to positive, or from bearish to bullish.
After a Positive Divergence and Bullish Centerline Crossover, the Bullish Centerline Crossover can act as a confirmation signal.
Of the three signals, moving average crossover are probably the second most common signals

MACD generates bearish signals from 3 hree main sources.
4 - Negative Divergence
5 - Bearish Moving Average Crossover
6 - Bearish Centerline Crossover

4 - Negative Divergence (least common but most reliable)
Forms when the security advances or moves sideways, and the MACD declines.
The Negative Divergence in MACD can take the form of either a lower High or a straight decline, and can warn of an impending peak

5 - Bearish Moving Average Crossover (most common but produce false signals)
Occurs when MACD declines below its 9-day EMA.
As such, moving average crossovers should be confirmed with other signals to avoid whipsaws and false readings.

6 - Bearish Centerline Crossover (indicates a change from bullish to bearish)
Occurs when MACD moves below zero and into negative territory.
The centerline crossover can act as an independent signal, or confirm a prior signal such as a moving average crossover or negative divergence.
Once MACD crosses into negative territory, momentum, at least for the short term, has turned bearish.

Combining Signals
As with bullish MACD signals, bearish signals can be combined to create more robust signals. In most cases, stocks fall faster than they rise

MACD is certainly a widely used/respected TA method. However, in my opinion, there are many many suitable technical indicators. To place all your eggs in the basket of one indicator is risky....sometimes they perform...sometimes they don't.

If you have listened to or watched my analysis in Stockhideout chat, you will see that I use 4 charts, six indicators plus chart overlays to come to a conclusion. I find this necessary since sometimes(often) you get false positives or negatives from a single indicator so it is prudent to seek confirmation of a given indicator's signal in the responses of other indicators.

To me TA is building a story about a stock's performance...it is a who-dun-it mystery. A single clue is often a red herring...reading the complete story gives a truer picture.