MACD & the Kumo

There were two nice examples of confluence between these two indicators this morning in NQ.

At the LHS price breaks the first five-minute bottom just after breaking the Kumo, which is just after the MACD crossover. In general MACD crossovers are great signals at Kumo breaks. Typically I wait for both price and MACD to pull back, after the break/cross, and then go. I almost always want to see that z formation with price, MACD or both.

Notice how the MACD is higher at the bottom of the move (right hand oval) that it was at the prior swing (left hand oval) yet price is lower. That’s divergence, it’s an indication that price may follow momentum. Combined with an extended price location with respect to the Kumo and a cross of the fast MAs it’s a decent spot for a reversal trade. With reversals I always trade them as targets. Other trades I prefer to move stops & take profits as the trade develops but reversals are usually too jumpy. My target is always somewhere in the Kumo.