Chart    Reading    Skills

"I always check my charts and the moving averages prior to taking a position"

By Marty Schwartz (Wall street trader and winner of US investing championship in 1984)

"To capture the biggest gains, it's important that you use both the daily and weekly charts, since they offer different views on stock. You will get more exact timing indications from the dailies and the big picture from the weeklies"

By William J. O'Neil (Founder of Investors Business Daily)

Quite often I hear from traders some of the indicators they use to do their technical analysis on a stock.  Quite common ones are the candle sticks, MACD, Stochastics, RSI, ADX, Bollinger bands, DMI, Williams R%, CCI, money flows, Elliot waves, fibonacci retracement  and countless others.  Most of these indicators are lagging indicators.  Some of the best indicators and very simple ones that I find to be useful are:

• Simple moving averages.
• Exponential moving averages.

They sound like such simple indicators and yet very few traders quite know how to interpret them along with the price and volume of a stock movement.  These indicators will make your trading a very simple process.  Sometimes we as traders and investors make it a lot more complicated than it really is.  I shall do several posts in the next few weeks to explain in details what some of these moving averages mean and how best to utilize them with your trading.

We will use the 4 stocks that I had highlighted as a small test position taken at market open last week when we had a  "Follow Thru"  day on Wednesday August 14th.  Currently these 4 stocks - $MTH, $PCTY, $PAYC, SBUX - are  +3.57%  while the Growth Stock Index  $QQQ  got slammed  -1.75%  in the last 8 trading sessions.  All the 4 stocks are currently hugging the 10 day simple moving average while the  $QQQ  has plummeted below the 50 day sma and heading towards the 200 day sma.  Study these 4 stocks and plot the 10 day sma as well as 50 day sma on your brokers platform.  Institutions are supporting these stocks while the  $QQQ  is headed towards the 200 sma.  How we manage these 4 leading stocks utilizing the moving averages while the   "Market is Under Pressure"  will be something that I will cover in the follow up posts.  

Happy Trading!

Amin