The broad markets (which is what I look at first before I study individual stocks) are trending downward. As you can see on this chart(above left) of the Dow Jones Industrial. It had a positive day yesterday and is now reaching back up to the 14 day moving average. Before I would think about buying stocks this chart needs to show some consolidation or the 13 day needs to start pointing up. So today I am staying on the sideline until the market shakes out .
While I am not in the market today I would like to show you a current chart of the S & P 500 (right) Market and how it has trend over the past few months and where there was plenty of opportunity to make some very good $$$$$. Look at the green arrows, here you can see that the market was trending down to the 21 day moving average and then would bounce back, it did this 4 times with the last arrow showing a top.
You ask how do you know where to get out or cover your position? There are a couple of signals that tell you the market is about ready to reverse, see where the last arrow is? once the stock price breaks below that arrow would be a good signal to get out. Another strong indicator is where the 13 day moving average crosses the 21 day moving average in a downward direction.
To me this is the simplest way of keeping track of the market. Just with these two exponential averages. I use to use others like Fibonacci, Williams % R, Bollinger band(I still use these once in a while) but really all that did was mess and confuse my charts. Learn to use these averages and again use patients and you should have success charting stocks. Let me know how your doing!!
Next time I will talk a little about the possibility of SHORTING STOCKS oooh noo!
Until next time HAPPY CHARTING
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