MACD

MACD (moving average convergence divergence) takes a fast exponential moving average (usually 12 periods) and subtracts a slow one (usually 26). The result is the MACD line. A 9-period average of that line, the signal line, rides along beside it. Many charts also draw a histogram showing the gap between the two.

When the fast average pulls away from the slow one, momentum is building; when they squeeze back together, it is running out of breath. Traders watch for the MACD line crossing its signal line, crossing zero, or disagreeing with price (a divergence). Like every indicator built on averages, it lags: it tells you what already happened, a little late.