Momentum Confluence: Reading All 5 Signals Together
Individual indicators are unreliable in isolation. The Minervini Trend Template gives you the structural foundation. ADX tells you trend conviction. Aroon tells you if the trend is fresh. MACD confirms momentum direction. RSI tells you if you're chasing. When they all agree — that's a confluence trade.
Confluence means multiple independent signals point to the same conclusion. For momentum stocks: Minervini Template = structural foundation (8 price/MA rules), ADX > 25 = trend has conviction, Aroon Up > 70 = trend is fresh, MACD > signal line = momentum is bullish, RSI 50–70 = momentum without being extended. When 4 or 5 of these agree, the edge is significantly higher than any single signal alone. When they conflict, you either wait for resolution or size down.
Why each indicator plays a different role
Each of these tools answers a fundamentally different question. That's what makes them genuinely independent — they're not five versions of the same thing.
| Tool | Question it answers | What "pass" looks like |
|---|---|---|
| Minervini Template | Is the stock in a proper uptrend structure? | Price above all MAs, MAs in correct order, near 52-week highs |
| ADX | Is the trend strong enough to be tradeable? | ADX > 25, DI+ > DI−, ADX rising |
| Aroon | Is the uptrend fresh or running out of steam? | Aroon Up > 70, Aroon Down < 30 |
| MACD | Is momentum currently pointed upward? | MACD > 0, MACD > Signal, Histogram positive & expanding |
| RSI | Is price momentum healthy — not extended? | RSI 50–70 (above midline, not overbought) |
The Minervini Template is structural — it uses price and moving averages. ADX and Aroon are directional — they use trend recency and strength. MACD and RSI are momentum oscillators — they measure the rate of price change. All three layers need to align for a genuinely high-probability setup.
The Minervini Trend Template: the structural foundation
Mark Minervini's Trend Template is a checklist of 8 conditions that must be true before a stock is even considered for a momentum entry. Think of it as the gate — if a stock fails the template, you don't need the other indicators.
The stock must be above both key long-term averages. Below either = structural downtrend.
Medium-term trend is above long-term — the MAs are in proper order, not inverted.
The long-term average must be rising — not just being crossed from below but still flat or declining.
Short-term momentum over medium and long-term. All three MAs in rising order: 50 > 150 > 200.
Price must currently be above the nearest key MA — not just trending near it.
A stock sitting just above a year low has no momentum. This filters out recovering-from-bust scenarios.
True momentum leaders are near their highs, not lagging far behind. Near-high = institutional accumulation.
Price must be outperforming most of the market. Relative strength separates leaders from the pack.
ADX: confirming the trend has real conviction
ADX (Average Directional Index)
A stock can pass all 8 Minervini rules and still be in a sluggish, low-momentum crawl. ADX filters that out. ADX above 25 confirms the trend has enough institutional force behind it to carry your trade. Below 20, even a perfectly structured chart is likely to grind sideways or chew through stops.
Aroon: is this an early-stage trend or a late-stage one?
Aroon Up / Aroon Down
ADX tells you the trend is strong. Aroon tells you whether that strength is fresh or fading. A stock with ADX 35 but Aroon Up at 40 (last 25-bar high was 15 bars ago) is a trend that peaked 3 weeks back and is grinding flat. A stock with Aroon Up at 92 made a new 25-bar high yesterday — the trend is very much alive.
MACD: is momentum currently improving?
MACD (Moving Average Convergence Divergence)
Where ADX and Aroon are about trend structure, MACD is about momentum right now. A stock can be in a perfect Minervini template with ADX 30 and Aroon 85 — but if MACD just crossed below its signal line, momentum is compressing. That's your warning to wait or size down.
RSI: am I entering at a healthy point or chasing?
RSI (Relative Strength Index)
RSI is the confluence check you use last — after the template, ADX, Aroon, and MACD all pass. Everything can look perfect, but if RSI is 82, you're buying after an extended move where mean reversion is a likely outcome. The sweet spot for momentum entry is RSI between 50 and 70: above the midline (bullish bias) but not yet overbought.
Building a confluence score
Think of a simple 0–5 scoring system. The Minervini Template is the gate — if it fails, score is automatically 0 regardless of indicators. Once the template passes, each indicator adds one point.
| Layer | Pass condition (+1 pt) |
|---|---|
| Gate | Minervini Template: all 8 rules pass |
| ADX | ADX > 25, DI+ > DI− |
| Aroon | Aroon Up > 70, Aroon Down < 30 |
| MACD | MACD > Signal, Histogram positive |
| RSI | RSI 50–70 (above midline, not extended) |
What to do when signals conflict
Conflicting signals are the norm, not the exception. The question isn't "do all signals agree?" — it's "how do I weigh disagreements?" The framework below handles the most common scenarios.
✓ Trust the trade (4–5/5)
Template + ADX + Aroon all pass. RSI slightly elevated (72) or MACD histogram just turning. Take the trade at standard size. The structural + strength + freshness trifecta is the highest-weight cluster. One extended oscillator doesn't override it.
⚠ Size down (3/5)
Template passes, but only 2 of 4 indicators agree. Common: ADX 28 (pass) but Aroon Up 55 (marginal) and MACD below signal (fail). Take half size. Place tighter stop. Add only if ADX rises and Aroon confirms within 3–5 bars.
☰ Wait for resolution
Template passes, ADX is rising (23 — not yet 25) and Aroon is near 70 but not there. This is a coiling setup where all signals are almost aligned but not quite. Patience is the edge here. Set an alert at ADX = 25 and Aroon Up = 70, then re-evaluate.
✗ Skip the trade
Template passes but ADX < 20 OR RSI > 80. Either there is no trend to ride (ADX) or the move is already overextended (RSI). The expected value of this trade is negative. Move on to the next setup. There will always be another one.
The hierarchy: not all conflicts are equal
When signals conflict, weight matters. Not all disagreements carry equal force.
| Priority | Signal cluster | Reason it outweighs others | Overrides |
|---|---|---|---|
| Highest | Minervini Template fails | No structural uptrend = no momentum trade. Period. All indicators are irrelevant. | Everything |
| High | ADX < 20 | No trend conviction = no edge. Oscillators generate false signals in ranging markets. | Aroon, MACD, RSI readings |
| Medium | RSI > 80 | Poor risk/reward for new entry. Template + ADX + Aroon + MACD may all be green. Still wait. | Entry timing (not the setup itself) |
| Lower | MACD below Signal | Short-term momentum dip. In strong trends, MACD dips below signal briefly during pullbacks before resuming. Size down, don't skip. | Nothing — reduce size, manage risk |
| Lower | Aroon Up 55–70 | Marginal — trend is aging but not broken. ADX and template still provide meaningful edge. | Nothing — monitor for resolution |
Six practical rules for using momentum confluence
- Minervini Template first, always. Do not look at the oscillators until the template passes. Checking RSI on a downtrending stock is noise. Save the analysis time for properly structured names.
- ADX is the trend quality filter. A 4/5 confluence with ADX at 22 is not better than a 3/5 confluence with ADX at 32. ADX strength matters more than total score when the readings are borderline.
- Aroon tells you how much runway is left. Aroon Up at 96 means a new high was just made — the trend has runway. Aroon Up at 48 means the high was set 13 bars ago — the trend may be stalling. Factor this into whether you hold through pullbacks.
- MACD divergence is an early warning, not a stop signal. If template, ADX, and Aroon are all green but MACD is diverging (lower highs while price makes higher highs), reduce size and tighten your stop. Don't exit — just get smaller.
- RSI pullbacks to 50 in uptrends are entries, not warnings. In a strong trend (template + ADX 30+ + Aroon Up 80+), an RSI pullback to 50–55 is a gift. The confluence is strongest when RSI dips and then resumes rising — that's trend continuation.
- When in doubt, size down — never up. The market will always give you another setup. The asymmetry is clear: sizing down in a confusing signal environment costs you some upside on a winning trade. Sizing up on a poor-confluence setup can cost you much more on a loser.
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