86.4k views
2 votes
When a stock makes a lower low but the MACD makes a higher low, what can occur?

1 Answer

4 votes

Final answer:

A bullish divergence wherein a stock's price makes lower lows and MACD makes higher lows often indicates a potential reversal in momentum, signaling that the stock might experience an uptrend soon.

Step-by-step explanation:

When a stock makes a lower low but the MACD makes a higher low, this is often interpreted as a bullish divergence. A bullish divergence occurs when the price of an asset is declining (creating lower lows), but a technical indicator like the MACD starts to show strength by making higher lows.

This divergence can signal that the downward momentum in the stock price is waning and that a potential reversal to the upside might occur. It suggests that the selling pressure is losing strength and that the stock may be ready for a possible rally or upturn.

However, traders and investors should use additional indicators and analysis to confirm this potential trend reversal to safeguard against false signals.

User Macno
by
8.8k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.