How I use MACD and KDJ indicators to analyse Apple stock
In my example, I used Moomoo indicators feature - MACD and KDJ to analyse $Apple(AAPL.US$ .
1) Moving average convergence divergence indicator is based on two exponential moving averages (shorter/fast and longer/slow EMA) to calculate the difference(DIF) between the two, then find the DIF N-day smooth moving average trend DEA(Convergence/Divergence) to determine if it is the right time to buy or sell a stock.
MACD and DIF are both negative and can be regarded as a short market. MACD and DIF are both negative, and DIF falls below MACD also known as death cross, this is a seller's market and it is more advantageous to go short (bearish). See Screenshot 1.
Limitation: 9 out of 15 indicators show bullish and only MACD indicates bearish. As a trend investor, I'll need to observe a longer period should I enter a short position. There is still a high probability that the signal is false as other indicators have given a oversold signal.
1) Moving average convergence divergence indicator is based on two exponential moving averages (shorter/fast and longer/slow EMA) to calculate the difference(DIF) between the two, then find the DIF N-day smooth moving average trend DEA(Convergence/Divergence) to determine if it is the right time to buy or sell a stock.
MACD and DIF are both negative and can be regarded as a short market. MACD and DIF are both negative, and DIF falls below MACD also known as death cross, this is a seller's market and it is more advantageous to go short (bearish). See Screenshot 1.
Limitation: 9 out of 15 indicators show bullish and only MACD indicates bearish. As a trend investor, I'll need to observe a longer period should I enter a short position. There is still a high probability that the signal is false as other indicators have given a oversold signal.
2) The KDJ indicator is to calculate the overbought and oversold scenario in n days. First, calculate the RSV value over aperiod (n days, n weeks, etc.), that is, the immature stochastic index value, and then calculate the K value, D value, J value, etc. Generally, n takes 9 days.
D line which is a slow major line indicates a value below 20. Hence the stock is oversold. J line which is a directional sensitive line, the value is less than 10 hence the stock price is near a short-term bottom. Note that a few days ago the K line breaks above D line on the graph, it is commonly known as the golden cross, which is a signal to buy. See Screenshot 2.
Limitation: The 3 lines may not agree with each other. K line which is a quick confirming line shows a value above 10 meaning the oversold signal is not clear yet. Hence more data is required.
D line which is a slow major line indicates a value below 20. Hence the stock is oversold. J line which is a directional sensitive line, the value is less than 10 hence the stock price is near a short-term bottom. Note that a few days ago the K line breaks above D line on the graph, it is commonly known as the golden cross, which is a signal to buy. See Screenshot 2.
Limitation: The 3 lines may not agree with each other. K line which is a quick confirming line shows a value above 10 meaning the oversold signal is not clear yet. Hence more data is required.
My take: It takes experience to use technical analysis tools to make effective decisions in stock trading. I prefer to use it as a trend forecast for options trading to reduce my risk. Someone who has red flags for confirmation bias may use TA Indicators to mislead others into FOMO buy (greed) and panic sell (fear) hence you should do due diligence (DYODD).
Disclaimer: The above is not financial advice and should be taken for educational purposes only. Short selling and option selling can lead to unlimited loss if you don't know what you are doing.
Disclaimer: The above is not financial advice and should be taken for educational purposes only. Short selling and option selling can lead to unlimited loss if you don't know what you are doing.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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I reflected trading experiences by writing journals. My comments are for educational purposes not financial advice.
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