MACD Downward Crossover is a bearish signal which is generated when a short-term moving average to cross below a longer-term moving average. This downward crossover implies that there is an increasing downward momentum in the particular counter. A short-term moving average crossing below a longer-term average is used to illustrate that the asset’s price has been moving downward at a faster rate, and that it may be a good time to sell.
Caution to be taken when applying this strategy:
1. Avoid to leave the market on the crossover day. Pause and watch the stock movement for another two days to observe whether the crossover is valid. The increasing selling volume and downtrend movement should remain intact to further reinforce the selling signals.
2. Never use a technical signal alone without other indicators. MACD is a powerful indicators, but it should be applied together with other indicators, chart reading, fundamental strength and trendlines.