Moving Averages

Let time be your ally.  That is possible with the use of Moving Average stock prices.  Analysis of a financial times series can reap significant rewards for a stock investor.  Observing a moving average helps smooth temporary anomalies in the stock price direction.  The use of two moving averages of different lengths provides even greater insight as it allows the investor to observe the build-up of a new and possibly different  trend in the short term.   This is called a ‘crossover.’  When the shorter or ‘faster’ moving average crosses above the longer or ‘slower’ moving average it is considered a bullish development.  When the shorter moving average crosses below the longer moving average, it is considered a bearish trend.  The most typical of comparisons is a 50-day to a 200-day moving average.


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