Moving average

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MarketWatch  Nov 7  Comment 
The Dow Jones Industrial Average is headed for the biggest one-day rally in over four months, but that's not quite enough to change the shorter-term technical outlook to positive from negative. The Dow, up 277 points at 18,165, was still about 51...
MarketWatch  Nov 4  Comment 
The S&P 500 managed to stay above its 200-day moving average, barely, despite suffering its longest losing streak in 36 years. The index hit an intraday low of 2,083.79, before closing at 2,085.18, which was 0.1% above the closely-watched moving...
MarketWatch  Nov 1  Comment 
Shares of Amazon.com Inc. bounced for a second-straight session following disappointing third-quarter results, but still remain in a technically precarious position. The stock rose as much as 1.4% to an intraday high of $800.84 within minutes of...
Benzinga  Jul 27  Comment 
The price of a barrel of oil traded on Monday below its 100-day moving average. A savvy investment individual would find this statement easy to comprehend, but a novice investor could find the concept of a moving average (and what it signifies)...
The Economic Times  Apr 18  Comment 
“Nifty crossing the 200 DMA is positive for the markets, while this will aid to bullish sentiments,” said Nagaraj Shetti, technical research analyst, HDFC Securities.
MarketWatch  Apr 4  Comment 
Apple Inc.'s stock climbed above its 200-day moving average in intraday trade Monday, for the first time in five months, before paring gains late in the session to close below that key technical threshold. The stock closed up 1% at $111.08, and...




 
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A moving average is a smoothed-out trend line built from an underlying set of data - stock prices in the context of investing. The moving average is calculated by taking, for each point in time, the average values of the underlying data from the previous N timepoints. So, for example, the 10-day moving average for a stock price is the average price of the previous 10 days' closing prices for every given day. The average is said to be "moving" because the time period over which the average is calculated is always the previous ten days of data for each day, and therefore is different for each day.

Moving averages smooth out data over time, and technical traders believe they reveal an underlying trend in a security's price. By increasing "N" - IE, by looking at, for example, a 200 day moving average instead of a 10 day one, a trader would see a trend on a larger scale than with the 10-day moving average, but with decreased responsiveness - IE, only long after large changes in the stock price would the 200-day moving average start to tend in a new direction, given the weight of all the historical prices in the 200-day moving average.

Exponential moving averages give more weight to the latest data points in the moving average calculation, making them more responsive to recent changes in stock price.

Technical traders will look to the convergence or divergence of moving averages, known as MACD, with different periods (or values of "N") to indicate patterns of resistance or support which technical traders believe indicate where a stock price is likely to move in the future.

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