23/11/2010 – Discover the Dynamics of Using Moving Averages

“…a simple 10-day moving average of the daily advance-decline
net, probably the first indicator a stock market technician
learns, can be used as a trading tool, if objectively defined
rules are created for its use.”

Indeed, “objectively defined rules” are vital to the
successful use of moving averages. And as you might imagine,
advanced rules and guidelines work to the benefit of more advanced
technicians.

What is a moving average? As EWI’s Jeffrey Kennedy
puts it, “A moving average is simply the average value
of data over a specified time period, and it is used to figure
out whether the price of a stock or commodity is trending up
or down.”

Jeffrey also says, “One way to think of a moving average
is that it’s an automated trend line.”

A 15-year veteran of technical analysis,  Jeffrey wrote “How
You Can Find High-Probability Trading Opportunities Using
Moving Averages.”
[Descriptions of the following charts are summaries from that
eBook]:

Let’s begin with the most commonly-used moving averages among
market technicians: the 50- and 200-day simple moving averages.
These two trend lines often serve as areas of resistance or support. 

For example, the chart below shows the circled areas where the
200-period SMA provided resistance in an April-to-May
upward move in the DJIA (top circle on the heavy black line),
and the 50-period SMA provided support (lower
circle on the blue line).

Let’s look at another widely used simple moving average which
works equally well in commodities, currencies, and stocks: the
13-period SMA. 

In the sugar chart below, prices crossed the line (marked by
the short, red vertical line), and that cross led to a substantial
rally. This chart also shows a whipsaw in the market, which is
circled.

Jeffrey’s 33-page eBook also reveals a useful tool to help you
avoid “whipsaws.”

You can read the first two chapters for FREE for a limited time,
once you become a Club EWI member.

The first two chapters reveal:

• The Dual Moving Average Cross-Over System 
• Moving Average Price Channel System 
• Combining the Crossover and Price Channel Techniques 

Jeffrey’s insights are all about making you a better trader.
Remember, the first two eBook chapters are FREE through
November 30. So
take advantage of this limited time offer by clicking here!