Trade China Stocks Using the MACD Indicator

By Stockpickr Guest Columnist Ira Krakow

Jim Cramer doesn't believe the China doomsday scenario that the financial media talking heads keep harping on. Instead, he sees great opportunity for gains.

If Cramer's right, stocks in Stockpickr's China Watch portfolio could be poised for a big rally. The portfolio includes outside plays on China, such as Wal-Mart(WMT Quote), Yum! Brands(YUM Quote) and Starbux(SBUX Quote), as well as more direct Chinese plays as Baidu(BIDU Quote), Focus Media Holding(FMCN Quote), Ctrip.com(CTRP Quote) and iShares FTSE/Xinhua China 25(FXI Quote).

Maybe we can get in on the action. In the technician's universe, "volatility" is not an evil word but rather a sought-after trait. Capturing rapid price swings can lead to quick profits (or even quicker losses).

In this article, I will introduce the MACD, or the moving average convergence divergence indicator, which is used either to confirm the potential buy or sell decision (a "convergence") or to detect a false positive (a "divergence").

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