Crossing the zero line on a momentum chart is viewed as a trading signal for many stock traders. A buy signal is generated when there is a crossing above the zero line, and a sell signal when the crossing is below. Remember, this is only a signal, and the basic trend analysis is still the overriding factor. The wise trader will never use oscillator analysis as an excuse to trade against the prevailing trend. So buy positions should only be executed when the zero line is crossed above and the market trend is up. Short positions should be taken when momentum crosses below the zero line in a confirmed downtrend. The use of a moving average will help confirm trend changes and the appropriate time to take a position. Below is a rough graph of a 40 day momentum line crossing above and below its zero line.

Andy Swan is co-founder and head trader for DaytradeTeam.com.  To get all of Andy's day trading, swing trading, and options trading alerts in real time, subscribe to a one-week, all-inclusive trial membership to DaytradeTeam by clicking here.