If you have been reading my posts over the past few years you will know I am not a proponent of back testing.  Back testing can only truly work if all the social, political and economic factors in the future are as equally weighted as they were in the past, and we all know that just isn't true.

For some time now I have been posting on my Chart of the Day which Barchart technical trading strategy has worked best on the individual stocks and one indicator that has been repeated more than any other is the 50-100 Day MACD Oscillator.

Barchart defines the 50-100 Day MACD Oscillator as:

The MACD Oscillator is the difference between a short-term and a long-term moving averages.
The three parameters are the number of periods for the short-term moving average, long-term moving average and the moving average of the resulting MACD Oscillator.

This shows the convergence and divergence of the two moving averages and is plotted as the red line around the zero point. The MACD is presented with its moving average as the green line. The MACD oscillator is available in the Custom Charts section of our site.

The Exponential MACD Oscillator uses the exponential moving averages in the calculations instead of the regular moving averages.

If you put a zero in the third parameter box, the program will not calculate the moving average of the MACD and only the red line will appear, and the resulting MACD is conventionally presented as a histogram for clarity.

When the MACD Oscillator is above the zero line, conventional wisdom interprets this as a bullish signal, and conversely, when the histogram is below the zero line this is interpreted as a bearish signal. The red line being above the green line reinforces a bullish signal, and the red line below the green line reinforces a bearish signal. Other interpretations use crossovers between the red and green lines as market timing signals if the resulting direction of both lines is the same. Going up is bullish, going down is bearish.


Sounds complicated but Barchart does the work for you and all you have to do is look at the Opinion Trading Strategy Performances for the Dow Jones Industrial Averages:

IndicatorTotal Number
of Trades
Average Days
Per Trade
Total Profit
from Trades
TrendSpotter53 Trades31 Days/Trade-641,834.69
7 Day Average Directional Indicator181 Trades11 Days/Trade-269,105.56
10-8 Day Moving Average Hilo Channel229 Trades7 Days/Trade-173,081.20
20 Day Moving Average vs Price164 Trades12 Days/Trade-257,876.45
20 - 50 Day MACD Oscillator30 Trades65 Days/Trade-366,641.59
20 Day Bollinger BandsŪ91 Trades3 Days/Trade87,407.75
40 Day Commodity Channel Index106 Trades9 Days/Trade-469,504.25
50 Day Moving Average vs Price114 Trades17 Days/Trade-492,341.16
20 - 100 Day MACD Oscillator21 Trades89 Days/Trade-205,995.86
50 Day Parabolic Time/Price144 Trades14 Days/Trade-299,017.34
60 Day Commodity Channel Index72 Trades13 Days/Trade-7,093.90
100 Day Moving Average vs Price71 Trades26 Days/Trade-164,542.20
50 - 100 Day MACD Oscillator15 Trades125 Days/Trade260,227.95

If you had followed the 50-100 Day MACD Oscillator above you would see that the indicators signaled a sell on 7/27 at 17440.59 which is 1621.15 higher than the Dow is as I am writing this post or 9.31%.

Looking today at the Dow as an individual stock:

Barchart technical indicators:
  • 100% Barchart technical sell signals
  • Trend Spotter sell signal
  • Below its 20, 50 and 100 day moving averages
  • Negative 14.82 Weighted Alpha
  • 15.50% off its 62 week high
  • Relative Strength Index 14.59
  • Recently traded at 15819.44 which is below its 50 day moving average of 17653.74

SUMMARY:

If you had followed the 50-100 Day MACD Oscillator you could have saved a whole lot of your capital.