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Stephen Oakes is an experienced financial titan from New York who brings Wall Street to Main Street. Over the past 11 years, he has developed and tested the renown, Oakes Momentum System, which uses a unique constellation of technical indicators to find timely buy and sell points. He holds an M.B.A. in the United States (New York) and has studied internationally at the Reims School of Management in France.

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Optimal Moving Average Positioning

July 23rd, 2006 • Related • Filed Under

Moving averages come in three kinds known as simple (SMA), weighted, or exponentially smoothed averages. An example of a 50-day moving average would be the last 50 days of a stock’s closing price added together, and then divided by 50. This procedure is repeated each day and forms a line.

Major moving averages can act as great supports for a stock. It can be like a magnet in the way a stock will bounce off it only to return to the moving average and bounce off it again.

On the other side of acting as a support, moving averages can also form a resistance. Once a stock has traded under a major moving, that average becomes a ceiling. This fact is especially true once the stock has fallen under its 200-day moving average. Some of the major moving averages include the 20-day, 40-day, 50-day, and 200-day moving averages. Other averages used that could be beneficial are a stock’s 10-day, 30-day, 40-day, and 100-day moving average.

This graph shows a typical setup when a stock is in good shape in an upward trend.

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