Following on from the previous article on the MACD indicator we established two ways the MACD indicator can give buy and sell signals but which also suggested the strength of the underlying trend.  Taking this a step further, in this article we will now explore the effect of using these methods on different timeframes and how different timeframe charts can be used to back up and confirm the signals occurring on other timeframes.

Figure 1 – Hang Seng Index (Monthly Chart)

The thing to note is on the weekly chart (Figure 2) that follows are confirmation signals that back up and confirm the buy and sell signals that are occurring from the crossovers of the averages on the monthly chart.  A close look at the weekly chart shows both MACD averages crossing through the zero line of the histogram at roughly the same time as the crossovers from the averages are occurring on the monthly chart.   

It’s when two timeframes begin to agree with each other that significant moves can occur, giving you the chance to identify and possibly open positions in the early stages of the new emerging long term trend.