An example of eyeballing it, LM was quite extended from 50 SMA, and it had a blow off top the other day, I shorted it @ that time: A good trader once told me, never buy something if it's hanging in mid-air. That means, if a stock is going to bounce or rally, it will mostly do it from the level of a 20, 50 100, 200, or 300 day SMA. At the least would predict LM to pull back to the 20 SMA on this chart. Chart:
What if? What if you asked someone what the MA duration is for a bar chart? What if you looked at the answer and agreed it was a possible MA value? What if you read about what the value of MACD is? What if it is considered a difference of two MA's What if you could see that this is where you started the thread topic? NB The cited MACD reference is way out of date.
Percent Deviation = ((close-Average)/Average)*100 This example (S&P emini reacting to the London bombings) uses a 1000 bar average:
I use it regularly, but not as a buying signal. I use it as a setup. What happens intraday after a setup on daily bars is what's important. A 50 day EMA is too long. A 20 or 10 day is more effective, depending on what you're looking for.
Hi, Interesting. Is this idea? I take 50 SMA and 2 versions, first the % deviation v.s. MA, and the other smoothing taking the 2SMA of close. Salut
stock prices dont really care about MAs. They bounce off them....go through them....dance around them.... whatever your heart desires to see. "oh....price fell below 20ma....next support will be 50ma"....CRAP....all crap!
Agreed...its just a way a trader pulls the trigger. If enough of them use it perhaps the longer ma's become slightly more signficant.
The last I checked, "stock prices" don't really show a lot of intelligence or care about anything, including MAs. But traders should. Saying that an MA is not relevant is like saying that price history is not relevant when buying or selling anything. It is ALWAYS a consideration, and I'll venture to guess that everytime you look at a chart the first thing your brain does, whether you realize it or not, is look at where price is in relation to history. That's an MA.
dear sir....i just shorted LXK earlier this morning @ 69.53 look at the MAs on the 5min and 60min charts and you tell me what effect they had on the price... even 200ma had little effect. Yes there is a reason behind this play....but my point is...dont rely on MAs to effect price. My little brain does look at MAs...but only with lots of other factors in play....MAs only small consideration...Support/ressistance have more bearing imo. New traders looking at this play on the hourly chart may be tempted to go long when price was at 20 ma...since hourly chart looked so good....they wouldve been down .80 by now.