Moving Average Convergence Divergence is mainly used as both a momentum indicator and a divergence indicator.  When the MACD is above the signal line positive momentum is present and conversely, negative momentum is present when the MACD is below the signal line.  As momentum is a key trait to many other indicators and is an important part of day trading assessments, using MACD to identify crossovers, divergence and the dramatic rise can be helpful to the trader.

A crossover is when the MACD line moves above or falls below the signal line.  Below the signal line indicates a bearish trend and above the signal line indicates a bullish trend.  It is advisable to wait until the crossover occurs to avoid entering a position too early before the trend forms and builds momentum. Divergence occurs when the price of the stock moves away from the MACD and usually signals a trend reversal is likely.

A dramatic rise occurs if the MACD indicator rises suddenly and dramatically (the short term moving average pulls away from the long term moving average).  This generally indicates the stock is overbought and a downtrend during a sell off is likely.