20 Day Moving Average

When looking for a stock that is experiencing a short trend, you will look for moving averages that are sloping in the downward direction.

The stock has to be trading below the 20 day moving average.

Above is a stock that clearly has plenty of sellers in it for the day. From 9:30 am the stock was sold hard and every attempt made my buyers in the stock was sharply pushed down as the stock headed lower.

The 20 day moving average in the stock acts as a clear dividing line, keeping the stock in check. ABCD stock never made an attempt to go close or even near to the 21 day moving average until 3:00pm EST.

If you have been following the lessons, you will know that at 3pm EST the bond market closes and sometimes stocks will halt their prevailing trend, or in special sessions stock might even reverse.

As represented in the chart above the stock changed its direction towards the 3pm time and headed upwards towards its 21 day moving average price.

The moving average again served as a day trading indicator to either exit or enter a trade.

The main lesson that should be learned from this chart is that the moving average kept the down trend in tact.

The stock obeyed the moving average and any attempt to go long the stock was unsuccessful because the stock could not make a strong enough move higher to halt the amount of selling that was occurring in it.

• Understanding the 20 day Technical Analysis Moving Average
• Stock Market for Beginners: understanding the 50 day moving average
• 3 200 Moving Average Rules That Should Never Be Broken
• Understanding the Psychology of the 200 Day Moving Average