Convergence
A phenomenon of MA is the trend-related convergence pattern. This occurs when the two MA lines narrow and become closely aligned. It often gives off a reversal signal and, if confirmed by related patterns, may be among the strongest applications of MA.
Convergence as part of a different set of indicators is aligned with the opposite of divergence and studied as part of EMA analysis of momentum. This is explored in Chapter 12. For the purposes of MA analysis, convergence is based on movement in the two SMA trends, fast and slow.
The chart in Figure 11.3 shows how this works. Convergence is strong in this example because it is confirmed by two other reversal signals.
Figure 11.3 Convergence (Chart courtesy of StockCharts.com)
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