STOCK GOODIES PLAYS OF THE WEEK

[Black_NITE]

Price Crossovers using Moving Averages
Moving averages can also be used to generate signals with simple price crossovers. A bullish signal is generated when prices move above the moving average. A bearish signal is generated when prices move below the moving average. Price crossovers can be combined to trade within the bigger trend. The longer moving average sets the tone for the bigger trend and the shorter moving average is used to generate the signals. One would look for bullish price crosses only when prices are already above the longer moving average. This would be trading in harmony with the bigger trend. For example, if price is above the 200-day moving average, chartists would only focus on signals when price moves above the 50-day moving average. Obviously, a move below the 50-day moving average would precede such a signal, but such bearish crosses would be ignored because the bigger trend is up. A bearish cross would simply suggest a pullback within a bigger uptrend. A cross back above the 50-day moving average would signal an upturn in prices and continuation of the bigger uptrend.
The next chart shows Emerson Electric (EMR) with the 50-day EMA and 200-day EMA. The stock moved above and held above the 200-day moving average in August. There were dips below the 50-day EMA in early November and again in early February. Prices quickly moved back above the 50-day EMA to provide bullish signals (green arrows) in harmony with the bigger uptrend. MACD(1,50,1) is shown in the indicator window to confirm price crosses above or below the 50-day EMA. The 1-day EMA equals the closing price. MACD(1,50,1) is positive when the close is above the 50-day EMA and negative when the close is below the 50-day EMA.