Today I want to talk about moving averages.
Moving averages would fall under the heading of 'technical
analysis'. But you don't have to be a technician to use them.
They're pretty plain and simple and very straight forward.
With the market still in a larger uptrend, there's no shortage of
stocks trading above their moving averages. But with the recent
pullback, some individual stocks saw their uptrends come to an
And if the market churns around in this area for any meaningful
period of time, you're likely to spot many more individual stocks
breaking their trend as well.
So let's take this opportunity to look at some key moving average
set-ups and what they mean.
Long-Term and Short-Term Moving Averages
Short-term moving averages help gauge the short term direction of
the market while longer-term moving averages take a bigger picture
The 200-day moving average would be a longer-term moving
In general, if a stock breaks the 200-day moving average on its way
down, that's generally thought to be bearish, and the longer-term
trend could be turning lower.
Tons of stocks did this in 2008.
The 200-day moving average can also act as support. If a stock
comes down, but stops at the major moving average and then starts
moving higher from there, it can act as a firm underpinning of
support for the stock. Kind of like a moving trendline.
And just like breaking the 200-day moving average on the way down
can often times signal a downtrend, an upside breakout thru the
200-day moving average can often times signal the beginning of a
new uptrend for a stock.
The 50-day moving average can be quite useful as well. It's more of
an intermediate snapshot of the price trend and is more sensitive
than the longer-term 200-day.
A rising moving average with the price trading above it is bullish,
while a descending moving average with the price trading below it
And even shorter term signals can be seen with the 10- and 20-day
Moving average crossovers can also be valuable. When the quicker
moving average (10-day for example) is above the slower moving
average (20-day), this is thought to be bullish. Likewise, when the
shorter-term is trading below the longer-term moving average, this
is thought to be bearish.
Over the last six weeks, there have been plenty of stocks that fell
below their shorter-term moving averages and even their longer-term
But there were plenty of stocks moving up, with their uptrends
intact. And finding these kinds of stocks is easy to do with a
The screen I'm running today looks for stocks trading above
their short-term and longer-term moving averages:
Current Price greater than 10-day moving average
Current Price greater than 20-day moving average
Current Price greater than 50-day moving average
Current Price greater than 200-day moving
Zacks Rank equals 1
(Only Strong Buys as ranked by Zacks)
One Year Projected Growth Rate (F1/F0) greater than
(Positive Projected Growth Rates.)
Below are 5 stocks that are all trading above their short-term,
medium-term and long-term moving averages (for 03-19-13):
The Babcock & Wilcox Co.
Columbia Banking System Inc.
National Instruments Corp.
Swift Transportation Co.
XL Group plc
Get the rest of the stocks on this list and start finding stocks
above (or below) their moving averages on your own. It's easy to do
and you'll be on your way to picking better stocks regardless of
whats happening in the market.
Click here for your free trial of the Research
Disclosure: Officers, directors and/or employees of Zacks
Investment Research may own or have sold short securities and/or
hold long and/or short positions in options that are mentioned in
this material. An affiliated investment advisory firm may own or
have sold short securities and/or hold long and/or short positions
in options that are mentioned in this material.
Disclosure: Performance information for Zacks' portfolios and
strategies are available at:
BABCOCK&WILCOX (BWC): Free Stock Analysis
COLUMBIA BK SYS (COLB): Free Stock Analysis
NATL INSTRS CP (NATI): Free Stock Analysis
SWIFT TRANSPORT (SWFT): Free Stock Analysis
XL GROUP PLC (XL): Free Stock Analysis Report
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