Finance.yahoo.com is a great place to start using technical analysis when assessing different stocks. I use it all the time to leverage the free interactive chart feature. The two technical indicators I use are the MACD and EMA. I have broken down a chart found of Disney’s stock from finance.yahoo.com, my go-to site for technical analysis.
The moving average convergence/divergence helps determine the momentum of a particular stock. I use this to gauge whether or not a stock is in an upward or downward momentum direction to help make decisions to buy or sell a stock.
In the screenshot below you can see the interactive chart of Disney over a 3 month period. There are two trend lines in the lower section of the chart labeled MACD. These trend lines give you insights of the stock’s momentum and when they crisscross it indicates a change in momentum.
You can see over the past three months, Disney has been steadily climbing topping out around 115. Since this high of 115, the stock started to loose momentum and started a downward trend when these trend lines crisscrossed. You can also use the orange indicators labeled “DIVERGENCE”. If the divergence is below the baseline it indicates a downward trend and the size of the orange bars displays how consistent the momentum is. The bigger the divergence (the size of the orange bars) the longer the stock will in that specific momentum. You can use the MACD technical analysis to determine where a stock is heading.
The EMA technical analysis is used similarly to the MACD. In this use case, I am using the EMA 5 and EMA 13 trend lines to gauge the momentum of a stock and what direction it’s heading. With this analysis, you also assess two trend lines and look for indications of momentum shifts (when the trend lines crisscross). This will also help you gauge whether you’re approaching a time specific bottom or a high of a particular stock.
When the EMA 5 is above the EMA 13, the stock is in an upward momentum trend and is likely to continue to grow. The opposite applies when the EMA 5 is below the EMA 13. When the EMA 5 is below the EMA 13 it indicates the stock is going down based on its current momentum.
Let’s take a look at the same chart but focus on the EMA trend lines.
I use this in combination with the MACD. When you notice both technical analysis criss-cross at the same time, then you’re onto something!
I am currently watching Disney and will likely buy Disney when the trend lines of both the MACD and EMA begin to criss-cross again indicating an upward momentum shift.
If you use any other applications to run technical indicators to assess stocks please share them in the comments below!