Two indicator lines oscillate between 0 and 100. Red line is more sensitive one, while blue one gives confirmation. Buy signal is generated when lines are below 20 level and breach 20 on their way up, while sell area is above 80. The MACD method can be applied to the stock market as a whole or to individual stocks. MACD makes use of three exponential moving averages-one short, one long, and one as a signal line, which is an exponential average of the difference between the two moving averages.
Horizontal line is used as an equilibrium level.
When the MCAD line is far from equilibrium line that means that public is reacting to the emotion of the trend. MACD histogram represents a distance between two lines on MACD chart. Lower below equilibrium line goes the histogram - more scared is the crowd about current situation. Small fluctuations close to the equilibrium line show that the market is neutral. Basically, it follows the price but the line is adjusted to the volume of trade.