Weekly then daily MACD confirmation on individual stocks

Two clocks on one stock

A TradersWeek editorial reading treats single-stock MACD as a two-clock confirmation problem. In that reading, the intermediate hypothesis is locked on weekly MACD-H and weekly MACD-Mo first. Daily crossings and price-indicator divergences then time an entry only when they do not contradict that weekly state.

The historical workflow inspects daily MACD-H and MACD-Mo readings only after the weekly pair. Under the weekly-daily stack, daily crossings are classified only after the matching weekly series are labeled rising, declining, positive, or mixed.

Histogram and momentum construction

MACD is a difference of two exponential moving averages of price, reduced to a histogram against a signal average and optionally to a short momentum of that histogram. A moving average is a specified simple or exponential average that sets MACD lookbacks, the signal line, and the three-period smooth of MACD-H momentum.

Period length n converts to an exponential alpha by 2/(n+1), so 12, 26, and 9 map to 0.15, 0.074, and 0.2, while 10 and 20 map to 0.182 and 0.095.

MACD is defined as the difference of exponential averages with alphas 0.15 and 0.074, the signal line as the 0.20 exponential average of that difference, and MACD-H as the difference between the signal line and MACD.

MACD-H is built from 10-, 20-, and 10-period averages on daily or weekly bars. MACD-Mo is a 10-period change in MACD-H, then smoothed with a 3-period simple moving average.

Weekly then daily classification

Daily MACD-H and MACD-Mo readings are inspected only after the weekly pair. Daily buy readings while both weekly series are declining are treated as less valid than daily buys that coincide with rising or positive weekly series, and the same pairing is applied on the sell side.

A weekly cash-index sequence

On a weekly cash-index example, both MACD-H and MACD-Mo were negative in May 1987. MACD-H entered buy mode in the first week of July and MACD-Mo confirmed one week later by crossing above zero.

On that same weekly series, MACD-Mo crossed below zero in the third week of September together with a negative MACD-H reading, and both continued lower through 19 October 1987.

An unconfirmed MACD-Mo drop below zero in late April was not joined by a MACD-H sell within the next five weeks and was therefore not treated as evidence that an important top had already formed.

Individual-stock weekly and daily charts

On a weekly individual-stock example, MACD-H stayed negative through a late rally while MACD-Mo turned up but remained below zero, producing a strong divergence from price. Divergence is a price-indicator disagreement in which price makes a new extreme while MACD-H or MACD-Mo fails to confirm that extreme. When the two series later conflicted, MACD-H was given more weight.

On a daily individual-stock chart, MACD-Mo made a higher low against price and crossed above zero four days before the lows, while MACD-H turned positive only on the first strong up day, against a weekly MACD-H that was declining but still in buy mode.

When the stacked readings mix

A multi-month choppy sideways stretch is identified as a setting where MACD-H and MACD-Mo are less effective. Mixed daily readings are clarified by checking whether the weekly pair is negative and declining.