As you may know I am in Colorado this week for some rest & relaxation time. There are many good reasons to take a break from everyday life on a regular basis and is something that I recommend everyone do.
On this particular time away I had set a few goals for myself in terms of things that I wanted to get accomplished – some things to do some deep thinking on. Through the course of the week I did manage to sneak in a trade here & there as the opportunity arose, but for the most part I left existing positions in play.
I did receive a fair number of good questions regarding Chart elements and thought I would focus on one particular one in this post: The Moving Average play. As you may know by now I use a variety of abbreviations in my charts (Glossary here) and so if you see “MA” in a chart I am referring to a Moving Average. I often will post charts showing an impending Moving Average breach and note on the chart to play the Bounce or Failure (sometimes I note “B/F” in referring to this). The following is an example of well a stock “walks the tight rope” that is the Moving Average:
As you can see, FO (Fortune Brands Inc) touched the 100 day Moving Average for 2 days and then bounced up to the 50 day Moving Average. A very nice clean job of walking that Tight Rope. The Stochastics bottoming & then curling up is a good tell for me that I look for in a stock’s movement. I like these types of setups very much due to the high probability.
Of course there are those times where the appropriate trade is to play the failure to hold a Moving Average – remember it is walking a tight rope.