20, 50 and 200 Simple Moving Averages




20, 50 and 200 Simple Moving Averages




I must confess that I’m more of a visual person when it comes to a whole variety of things, and same goes for technical analysis and stock charts.

Someone said that looking at a stock’s chart is like tracking the progress of that stock, somewhat like a report card. And from there, we determine the potential performance of the stock.

It’s not a crystal ball, but a stock chart can determine the momentum of a stock, and along with the proper indicators, can be very informative in evaluating the strength of a stock.

Of course, studying a company’s fundamentals is vital. But stock charts can tell you a LOT and patterns can emerge to help one make a decision on whether to buy or not, when and when not to buy, and so on.

20, 50 and 200 Simple Moving Averages

TOS Chart

I use the following Simple Moving Average configurations in all my charts.

  • 20 Day – Simple Moving Average (Blue)
  • 50 Day – Simple Moving Average (Orange)
  • 200 Day – Simple Moving Average (Pink)

Basic Signs and Indicators

A Perfect Scenario.
First off, study the chart above and notice the 20, 50 and 200 Day Simple Moving Averages. Notice how they are all uptrending? Especially the 200 Day Moving Average, which should indicate a major trend upward. And also notice that all 3 moving averages are somewhat parallel to each other and none of them cross one another.

To me this is the ideal scenario that I personally look for when buying stocks in general, and especially for long term investing, this stock’s chart looks really good.

The 200 Day Moving Average.
It’s very simple to understand this one.

  • If the line is moving upward to the right, we are in an uptrend.
  • If the line is moving downward to the right, we are in an downtrend.

The 20 and 50 Day Moving Averages.

  • If both moving averages are parallel and trending upward, then that’s generally a good sign.
  • If the 20 DMA crosses below the 50 DMA, that’s usually signaling a downtrend.
  • If the 20 DMA crosses back above the 50 DMA, that’s usually signaling another uptrend.
  • If the 20 and 50 DMAs cross below the 200 DMA, that’s a bad sign.
  • If the other two lines are above the 200 DMA then that’s generally a good sign.

More Investing Thoughts

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Monday February 12, 2018 by Carlos Rull
Filed as: Investing, Stocks
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Carlos Rull

Carlos Rull is a musician living in the San Diego area. His interests include Yoga, Eastern Philosophy, Zen Buddhism, and Gardening. He plays drums, piano, and composes New Age & Ambient music, and his albums are available on iTunes and Amazon.com.

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