This section covers MACD and RSI

Developed by Gerald Appel, Moving Average Convergence/Divergence (MACD) is, according to many chartists, one of the simplest and most reliable indicators available.

MACD uses moving averages, which are lagging indicators, to include some trend-following characteristics. These lagging indicators are turned into a momentum oscillator by subtracting the longer moving average from the shorter moving average. The resulting plot forms a line that oscillates above and below zero without any upper or lower limits. MACD is a centred oscillator and the guidelines for using centred oscillators apply.

Market Shares provides a MACD chart that has 3 value lines on it. The red line reflects share price/index value while the others reflect the 12 day (short) and 26 day (long) exponential moving averages (EMA’s).

Of the two moving averages that make up MACD, the 12 day EMA is the faster and the 26 day EMA is the slower. Closing prices are used to form the moving averages. A 9 day EMA of MACD is calculated to act as a trigger indicator. A bullish (Buy) crossover occurs when MACD moves above its 9-day EMA and a bearish (Sell) crossover occurs when MACD moves below its 9-day EMA.

The default settings are;

• entity = the subject company
• period = daily

Market Shares offers three time period options in a drop-down facility; Daily, Weekly and Monthly. Simply click on the drop-down arrow and select the desired period and then click on the ‘Show’ button.

For more information see Moving Average Convergence/Divergence (MACD)

Relative Strength Index (RSI) is a popular share price/index value momentum indicator.

Market Shares provides a Relative Strength Index (RSI) chart that has 2 value lines on it. The red line reflects share price/index value, while the black line is the RSI.

The default settings are;

• entity = the subject company
• period = weekly

To select another company or index you simply highlight the subject company and begin to type the name or code. This will result in a list of likely suspects. Click on the desired entity and then click on the ‘Show’ button located to the right.

Market Shares offers three time period options in a drop-down facility; Daily, Weekly and Monthly. Simply click on the drop-down arrow and select the desired period and then click on the ‘Show’ button.

Note: You can edit both the entity name and period together before clicking on the ‘Show’ button.

The RSI graph has four horizontal lines;

• two for the 30/70 values (commonly viewed as the oversold/overbought signals)
• two for the 5th/95th percentile occurrences

Companies vary in the regularity of crossing the 30/70 values.

Market Shares provide the percentile lines for analysis of opportunities. If a company’s RSI is at or above the 95th percentile line, it is simply indicating that for the graphed period (1 yr if Daily, 5 yrs if Weekly and 8 yrs if monthly), the price momentum has only continued upwards for 5% or less of those occurrences.

Similarly, if the RSI is at or below the 5th percentile line, it is simply indicating that for the graphed period the price momentum has only continued downwards for 5% or less of those occurrences.

Additionally there are Buy/Sell triggers displayed. Triggers are only indicators, not guarantees. These triggers are determined by the value of the RSI approaching the 50 value having been above or below 50 by a value of greater than 5.

For more information see Relative Strength Index (RSI)