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A bullish centerline crossover occurs when 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 moving average crossover, the centerline crossover can act as a confirmation signal. Of the three signals, moving average crossover are probably the second most common signals.
Caution to be taken when applying this strategy:
1. Avoid to enter 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 buying volume and uptrend movement should remain intact to further reinforce the buying 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.