Used to smooth out fluctuations in price movement to filter out noise and emphasize the direction of a trend. Moving Averages often serve as support and resistance.
- StockTock uses the Simple Moving Average (SMA) on its charts of 20, 50, and 200 periods. These moving averages may be significant on intra-day, daily, and weekly charts.
- Think of the 20-period moving average like home. A stock can travel away for a period of time, but it always comes back home eventually. When a stock is extended well above or below its 20-period moving average, watch for a counter-move back towards home.
- The first hit of the 50 or 200-period moving average usually causes a bounce as the level serves as support or resistance. The 200 is the most reliable, followed by the 50, then the 20.
- When two moving averages intersect each other, that point is called a necktie. A necktie usually serves as major support or resistance.
- StockTock shows the 20-period moving average in blue, the 50 in red/pink, and the 200 in gray.
