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This story originally appeared on MarketBeat
MACD, whose formal name is the “Moving Average Convergence/Divergence indicator,” ties a stock’s momentum together with its trend lines. This indicator can help you identify points where a stock may be ready to rally.
The most common setting for MACD is known as 12, 26, 9. That means taking the difference between the 12- and 26-day moving averages, and plotting it against the 9-day exponential moving average, the signal line.
Although the concept can sound complex, the MACD indicator is very easy to use, by tracking when the signal line, or faster line, crosses above the series.
For example, on PacWest Bancorp’s chart, that crossover just happened. You can easily see the uptrend on the chart, as well, but the MACD crossover can confirm a new trend.
PacWest is the holding company for Pacific Western Bank, which operates 72 branches, the majority in California. The stock gapped up on April 22, after reporting first-quarter earnings of $1.27 per share on revenue of $318.2 million, beating top- and bottom-line estimates.
The bank is bolstering its presence in the homeowners association market with its $250 million purchase of MUFG Union Bank’s HOA services unit. The deal is expected to close later this year.
NovembThe stock has been in rally mode sinceer, advancing 161.21% over the past year, and 69.09% year-to-date. It cleared a base on Friday, passing resistance at $42.59. It rallied to a high of $44.18 in Monday’s trade, but retraced most of its gains, to finish at $42.87.
Volume was light as the stock cleared its base, but watch for heavier volume in the coming days and weeks if the stock resumes its rally.
Thor Industries saw its signal line cross above the MACD series line on Monday. The stock gapped up, ending the session at $145.40, up $4.46 or 3.16%.
Thor Industries may not be a well known name, but its products are: The company makes recreational vehicles under several brand names, including Airstream and Jayco.
The share price slumped in mid-2020, along with the company’s earnings and revenue. All have since rebounded strong. Earnings grew 37% and 255% in the past two quarters, as sales increased 18% and 36%.
Shares rallied 152.98% over the past year, despite the price correction between August and January. The stock ended up forming a double-bottom pattern, which can often be constructive. In this case, the pattern set up the stock for a 35% post-breakout rally.
Monday’s gap higher came as smaller stocks broadly rallied in the session. Thor’s trading volume was below average, but heavier than the previous session, which can be a good sign of technical strength. Watch for a continued uptrend ahead of the company’s earnings report on June 8.
Aktore’s signal line is trending higher, and as of Monday, was slightly below the MACD series line. The stock cleared resistance above $75.60 on April 22, and added to those gains in the past two sessions. Volume was heavy as the stock cleared its buy point.
The company makes electrical and mechanical components for construction and industrial applications.
Excluding an earnings decline in the second quarter of 2020, the company notched double- or triple-digit gains in the past two years. Sales grew 14% in the last quarter, bouncing back after four quarters of year-over-year revenue declines.
Despite the revenue setbacks, investors still see the stock’s potential. It’s posted a three-month gain of 67.61% and a year-to-date gain of 87.96%. Shares closed Monday at $77.27, up $1.04, or 1.36%.
The stock, which went public in 2016, is trading at all-time highs. Though it cleared the buy point, it’s still potentially in a buy range, as it’s less than 3% above the pivot.
However, investors should use caution: The company reports earnings on Thursday, and you don’t want to get caught up in a downdraft, even temporarily, if the report contains something institutional investors don’t like.
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