MACD

MACD takes two moving averages of a stock's price, one covering a shorter period and one a longer, and plots the difference between them. When the shorter average pulls away from the longer, the gap widens; when they come back together, it narrows. That widening and narrowing is the whole output.

A second line, an average of the MACD line itself, is drawn alongside it, and much of the commentary about MACD concerns the two lines crossing. The crossing is arithmetic: it happens when recent prices have shifted relative to older ones, by construction.

MACD belongs to technical analysis, which studies price and volume patterns rather than a company's business. It is derived entirely from past prices, so it contains no information about revenue, debt, or what the company sells. People who use technical indicators argue they summarize crowd behavior; people who do not argue that a formula applied to old prices cannot see anything the prices did not already show.