Generally speaking, is above average when the is positive and below average when the is negative. A negative and rising indicates that levels are increasing. A positive and falling indicates that levels are decreasing. Chartists can use this information to confirm or refute movements on the price chart.
Even though the is based on a momentum oscillator formula, it is important to remember that moving averages lag. A 12-day include 12 days of data, with newer data weighted more heavily. A 26-day lags even more because it contains 26 days of data. This means that the (12,26,9) can sometimes be out of sync with price action.
The ( ) is a applied to . This oscillator can be quite choppy due to the fact that doesn't trend. and divergences are not well suited for the . Instead, chartists would be better off looking for signs of increasing with a move into positive territory and signs of decreasing with a move into negative territory. Increasing can validate a support or resistance break. Similarly, a surge or significant support break on low may be less robust. As with all technical indicators, it is important to use the ( ) in conjunction with other aspects of , such as chart patterns and momentum oscillators.
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