Wanna Know How to Read this Chart?
Updated: Aug 18
This chart shows us historical trading prices. The lines represent simple moving averages for different time periods. For example, the 20 day (Green), 50 day (Purple), 100 day (Red) and the 200 (Blue) day simple moving averages.
Investors may use the simple moving averages to attempt to predict future price movements. When using simple moving averages (sma) these investors look for cross over points. For example, if and when the 20 day moving average becomes higher or lower than the 50 day moving average, then the lines cross. A cross over point can indicate the beginning of a down trend or the beginning of an upward trend.
For example, earlier this year, the 100 day simple moving average crossed below the 200 day sma. Technical traders may have sold around that time because this was a bearish signal.
This week we saw the 20 day moving average surpass the 100 day sma for broad index ETFs SPY and QQQ. This could be interpreted as a pre-cursor to a larger rally, but it is tough to say with any certainty. Technical signals are no guarantee.
The 200 day sma remains well above the 20, 50, and 100 day averages. Plus, news of a Chinese (CCP) invasion of Taiwan may be what it takes to put a stop to this summer's rally.
Simple moving averages are one example of a technical indicator. Technical analysis can be helpful to view trends while building an asset allocation strategy that helps to mitigate the risks of the market.
Bulldog Financial Planning does perform technical analysis along with other research like fundamental, industrial, and economic.
BFP offers training to investors who seek information on using technical indicators, reading charts or understanding market mechanics.