Whenever the moving average convergence divergence (MACD) line crosses above zero it is considered bullish, while crossing below zero is bearish. Secondly, when MACD turns up from below zero it is considered bullish. When it turns down from above zero it is considered bearish. Therefore MACD is not only useful in identifying break outs on the up side and the down side but it is also useful in identifying classic turnaround cases. The MACD can be an important lead indicator to identify turnaround cases.

When the MACD line crosses from below to above the signal line, the indicator is considered bullish. The further below the zero line the stronger the signal.

When the MACD line crosses from above to below the signal line, the indicator is considered bearish. The further above the zero line the stronger the signal.

Apart from the buying and selling signal, the MACD also gives a no-trade signal which the time when it is best to avoid trading in the market. During trading ranges the MACD will whipsaw, with the fast line crossing back and forth across the signal line. This is indicative of a rise in the level of volatility in the stock price or the market overall. Users of the MACD generally avoid trading in this situation or close positions to reduce volatility within the portfolio. Divergence between the MACD and the price action is a stronger signal when it confirms the crossover signals.