help with moving averages!

[rickjust]

hi,
what is the best moving averages to use and does it vary for every stock.
ema or sma?
here is an example of ptsc with the 50 ma and also with the 50ema. one is support and one is resistance. Which one to use? any help appreciated.
maxi,

[rickjust]

hi,
what is the best moving averages to use and does it vary for every stock.
ema or sma?
here is an example of ptsc with the 50 ma and also with the 50ema. one is support and one is resistance. Which one to use? any help appreciated.
maxi,

anyone?

[AussieTrader]

Hey Rick,

From my point of view I like to use moving averages that I know are very popular and therefore have a large weight of 'eyes' waiting for that particular average to come into play be it support or resistance. So for example the 50MA, more eyes will be looking at the 50SMA than the 50EMA (just because 50SMA is used more frequently by people). Now that said, in my daily charts I use both 200SMA and EMA because I have seen so many times they can both come into play in relation to support and resistance, so by tracking both I can perhaps have a better entry / exit strategy.

From a 'scientific' point of view perhaps you should model a chart with EMA/SMA's of your choice then run a bunch of your favourite (or most active) tickers through the charts, see how the averages play out historically and then decide which ones you like the look of.

For sure once selected you should stick with those averages and build them into your trading rules, creating new averages for different stocks in my view is a bit like the tail wagging the dog.

[rickjust]

hi,
thanks aussie, i noticed that stockcharts automatically puts up sma, so i thought i would do a comparison with the ema 50 on ptsc just because it was getting so close.
looking at hom i figured it would hit the 50ema and find support there. it comes in at about 967tomorrow. gigm hit 790 almost the 50ema and found support.
just thinking aloud about these stocks after a correction like the last week or so. stocks like hom and gigm both with good fundamentals but very fast rises will find support in these areas and consolidate for a while before continueing. what do you think.
thanks for the reply,
maxi

[setravis]

To define an exponential moving average (EMA), it will be helpful first to define a simple moving average (MA). A simple moving average shows the average price over the last n days:

Simple MA = (P1 + P2 + ...... + Pn) / n

where P = price

The problem is that simple moving averages are "jumpy." They respond twice to each piece of data - once when it is added, and again when it drops off. Having the moving average change when a price is removed is a bad thing. When a high price is dropped, the MA will most likely tick down. When a low price is dropped, the MA would probably tick up even if the price went up that day, but by an amount smaller than the value that was dropped. As Elder says, "A simple moving average is like a guard dog that barks twice."

The solution to the unreliability of this alarm is to use Exponential Moving Averages.

An exponential moving average gives more weight to the latest data and responds faster to changes than does a simple MA. At the same time, EMA does not jump in response to old data being dropped off. Again, as Elder says, "This guard dog has better ears, and it only barks once when someone approaches the house."


EMA = price today * K + EMA yest * (1-K)

where K = 2 / (N+1)

This is a continuous formula: each day the latest price is factored in, and old data fades towards oblivion, as it should. The older the data, the less importance is attached to it.

[D&Data]

Other question...
when 50 day Ma hits 200 day MA ...when 50 is under at the encounter by both lines... 
-->@this moment... we might see a breakdown or what?

[rickjust]

thanks, setravis,
maxi

[D&Data]

Other question...
when 50 day Ma hits 200 day MA ...when 50 is under at the encounter by both lines... 
-->@this moment... we might see a breakdown, isn't it ?
thnx

[AussieTrader]

Other question...
when 50 day Ma hits 200 day MA ...when 50 is under at the encounter by both lines... 
-->@this moment... we might see a breakdown, isn't it ?
thnx

50 crossing upward through 200 is bullish.

In an earlier post I mentioned that I track both the 200sma and ema. The below chart shows why I choose to do that (in this example 200sma support, 200ema resistance, a nice entry and exit signal if you like)

[D&Data]

and...50 crossing downward through 200 is bearish.
I was asking this cause I'm watching a stock where there will be the case despite the fact that they will normally have some good results 4 a clinical phase in 2 two weeks.
I hope that we won't see a massive selling there .
D.

have a look :

http://finance.yahoo.com/q/ta?s=INSM&t=1y&l=on&z=m&q=l&p=m50,m200&a=&c=

[anbu2020]

There are short course on Basic of technical studies given by Bombay Stock Exchange. There are several Books available in the market to have an overview viz, Technical Analysis of Stock Trends by Robert D Edwards & John Magee, Technical Analysis of the Financial Markets by John J Murphy, How to Make Money Trading with Charts by indian author and trader Ashwani Gujral.

There is an also Certified Technical Analyst (CeTA) course conducted by The Association of Technical Analysts, which would help you to have better insight



_____________________________
Advertise what ever you want on another site...not here...let's stick to the Stock Market !
Thanks,
setravis

[setravis]

anbu2020
Advertise what ever you want on another site...not here...let's stick to the Stock Market !
Thanks,
setravis