Yesterday, we looked at a Daily Price Chart of Redfin Corp., noting that the stock had been making a series of higher highs and higher lows.
Today’s Chart of the Day is a Moving Average Convergence/Divergence (MACD) chart for GDS Holdings Ltd. (NASDAQ: GDS).
GDS Holdings Limited, together with its subsidiaries, develops and operates data centers in the People’s Republic of China. The company provides colocation, managed hosting, and managed cloud services, as well as consulting services to the cloud, internet, and banking industries. The company serves cloud service providers, internet companies, financial institutions, telecommunications and IT service providers, and large domestic private sector and multinational corporations.
Now, below is a Daily Price Chart with a 12/26/9 MACD indicator for GDS Holdings Ltd. The MACD chart is shown below the Daily Price Chart.
The GDS Daily Price Chart below shows that GDS stock is in a price uptrend as the 12/26 Day MACD line (black line) is above the 9-Day EMA (purple line).
MACD lines were created to help traders verify the momentum of any given stock’s price. MACD lines are plotted by subtracting the longer-term Exponential Moving Average from the shorter-term Exponential Moving Average. In this example, we are using the most common parameters — the 12-Day Exponential Moving Average and the 26-Day Exponential Moving Average.
When the 12/26 Day MACD line crosses the 9-Day EMA line, this signals either a ‘buy’ or a ‘sell’. When the 12/26 MACD crosses above the 9-Day EMA, this is a ‘buy’ signal and when the 12/26 MACD crosses below the 9-Day EMA, this is a ‘sell’ signal.
MACD charts also include a histogram bar graph. This portion of the chart helps to indicate when a stock’s momentum is either accelerating or slowing. When a crossover initially occurs, the histogram’s bar will be near flat as the two indicator lines have converged. As the 12/26 MACD and 9-Day EMA lines begin to separate, the bars grow in height, indicating a widening gap and acceleration for the stock’s momentum. When the histogram’s bars begin to shrink, this indicates a narrowing of the gap between the 12/26 Day MACD and the 9-Day EMA and a slowing of the stock’s momentum.
When the histogram bars begin to shrink, this can be a signal that a crossover of the indicator lines could happen soon.
As you can see in the chart above, once the MACD line crossed above the 9-Day EMA, GDS’s share price began to rise.
If you had purchased GDS shares when the MACD ‘buy’ signal occurred for the stock back on June 4, when it was around $60.83, you’d be up 31.9% by now.
Not a bad profit for a three week-long hold of a major data center company.
We will continue to monitor GDS as long as the stock’s momentum continues its bullish run.
Editor, Chart Of The Day