Medium-Term Stock Indices Strategy
Medium term moving average strategy will use the 50 period MA.
The 50 period MA acts as support or resistance level for the price.
In an upward trend the 50 period MA will act as a support, price should always bounce back up after touching the MA. If the market closes below the indicator then this will be an exit signal.
50 MA Moving Average Period Support - Stock Indices Strategy Examples
In a down Stock Index trend the 50 period MA will act as a resistance, price should always go down after touching the moving average. If the market closes above the indicator then this is an exit signal.
50 MA Moving Average Period Resistance - Trading Strategies Examples
50 Day MA Moving Average Trading Analysis
As the trend moves up, there is a key line you want to watch - this is the 50 day Stock Index moving average. If the market stays above this 50 day Stock Index moving average moving average, that's a good signal. If the market drops below the 50 day Stock Index moving average in heavy volume, then watch out, because there could be trend reversal signal ahead.
A 50 day MA indicator takes 10 weeks of Stock Index market data, & then plots the average. The moving line is recalculated every day. This will show the trend - it can be up, down, or sideways.
You normally should only buy when Stock Indices prices are above their 50 day Stock Index MA. This tells you the current market direction is trending upwards. You always want to trade with the trend, & not against it. Many Stock Indices traders only open orders in the direction of the market trend.
Prices normally will find support over & over again at this 50 day Stock Index moving average. Big investing institutions such as mutual funds, pension funds, & hedge funds watch this level very closely. When these big volume entities spot a Stock Indices trend moving down to its 50 day line, they see it as an opportunity, to add to, or begin a new Stock Index trade position at a reasonable level.
What does it mean if your price moves downward and slices through its 50 day line. If it happens on heavy volume, it is a strong Stock Index signal to sell. This means big institutions are selling their share, & that can cause a dramatic drop, even if fundamentals still look solid. Now, if your price drops slightly below the 50 day line on light volume, watch how it acts in the following days, & take appropriate action if necessary.
