The 50 Day Moving Average Pull Back
Since the prince doesn't want to do any reading, I thought I'd post a little something for him with few words and lots of pictures. First, a word about moving averages.
A moving average as defined by the investorpedia: " A moving average is calculated by adding the closing price of the security for a number of time periods and then dividing this total by the number of time periods."
The 50-day moving average is often a key support price for a stock that is being accumulated by institutional investors. Check out the chart of Apple computer (AAPL) below. After a strong break-out, the stock fell back to the 50 day moving average (the red line) in mid october. At that time, I mentioned it to mo, because he said he missed his chance to get in to apple over the summer when it was forming it's base. Apple has had quite a run up since then.
As another example, one a little more recent, the graph below shows the chart for Somenatecs Corp (SMTS). 3 days ago it fell back to it's 50 day moving average. It has since started moving up again.
The point of all this is that if you are following a stock, with highly-rated fundementals, and it broke out of a sound base, had a good run up, and it then pulls back to it's 50 day moving average, there is a buying opportunity. It should be noted that the buying opportunity occurs once the stock starts moving back up again. Just intersecting the 50 day moving average is not enough as the stock could be forming a new base.
One last example. In the chart above, Ceradyne inc (CRDN) shows multiple pull backs to the 50 day moving average. Each pull back has recovered and continued upwards. The next couple of days will tell the story on the latest pull back. Either the stock will recover, or it will start forming a new base.
Since the prince doesn't want to do any reading, I thought I'd post a little something for him with few words and lots of pictures. First, a word about moving averages.
A moving average as defined by the investorpedia: " A moving average is calculated by adding the closing price of the security for a number of time periods and then dividing this total by the number of time periods."
The 50-day moving average is often a key support price for a stock that is being accumulated by institutional investors. Check out the chart of Apple computer (AAPL) below. After a strong break-out, the stock fell back to the 50 day moving average (the red line) in mid october. At that time, I mentioned it to mo, because he said he missed his chance to get in to apple over the summer when it was forming it's base. Apple has had quite a run up since then.
As another example, one a little more recent, the graph below shows the chart for Somenatecs Corp (SMTS). 3 days ago it fell back to it's 50 day moving average. It has since started moving up again.
The point of all this is that if you are following a stock, with highly-rated fundementals, and it broke out of a sound base, had a good run up, and it then pulls back to it's 50 day moving average, there is a buying opportunity. It should be noted that the buying opportunity occurs once the stock starts moving back up again. Just intersecting the 50 day moving average is not enough as the stock could be forming a new base.
One last example. In the chart above, Ceradyne inc (CRDN) shows multiple pull backs to the 50 day moving average. Each pull back has recovered and continued upwards. The next couple of days will tell the story on the latest pull back. Either the stock will recover, or it will start forming a new base.
posted by jerkwater at 8:24 PM
2 Comments:
the prince understands
Where's the cup and handle. I'm lost without my handle. Was the moving average what prompted you to buy GOOG?
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