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For those that successfully play bounces off a moving average, what have you found to be the best approach?
- to buy as it touches the MA and hope for the bounce
- to buy the next day after it successfully holds
- to buy at some other point?
- something else?
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Registered User
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QUOTE (ben2k9) For those that successfully play bounces off a moving average, what have you found to be the best approach?
Good question on keying off of moving averages. I am a very strong believer in using them as major inflection points.
On the upside recent good examples imo of buying a test and bounce off the 50-ema or 200-ema would be SPR yesterday/today (200), BRKR late May (50). My method is to wait and let price test the average and then bounce, taking out previous day's high and/or finishing the day above the moving average on above average volume or maybe volume higher that previous day.
Notice how BRKR on 5/29 was a buy signal near the close as price finished higher than the previous day and regained the 50 at the same time even though volume was not impressive. A few days earlier on 5/26 price tested the 50 and finished above but failed to take out the previous day's high by at least a dime, but that's splitting hairs and at the time would not have been a bad buy/trade even though in hindsight it failed short term.
CLDX today a good example, looks to be making a good bounce off its 50 test.
During past week I watched LVS (former watchlist dragon) come down to test the 50, but it has failed to bounce and yesterday closed far enough below for me to completely switch from bull to bear on it as I started a new short position in it.
Watching BKD, similar story, after failing the 200 now testing near-by 50, looks like it wants to fail that too which would be short signal.
Getting too wordy as usual, but what else to do while waiting for the Worden servers to come back online. But a quick look at the charts mentioned ought to give you a feel for what I look at when considering stocks testing the major averages, long and short.
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Joined: 1/28/2005
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Linda Raschke has the "holy grail".
You can google it.
Typically uses a 20ema with adx.
Typically (in short-term) when you are down to the average
you would place a buy at the last bars high.
(if it goes down again you lower the buy)
I typically watch where the close is with-in the bar.
On a short term basis when you have 2 to 3 days
with the close in the top 25% its a good place to exit
or tighten stops. (for longs, flip for shorts)
I've never put a number on it but my guess is the stronger the
trend the lower/higher you can buy/sell.
Thanks
diceman
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Joined: 3/21/2006
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Ben, I want to make it clear that I am only stating my opinion here.
I have done studies on moving averages of all kinds for many years and I must say that although I consider them great trend guides and have also noticed that certain moving average cross overs are relevant in certain market conditions I have not found them to be usefull when timing a reversal. Yes I have seen at times that price will respect the 200 day or the 50 day. But a far more reliable way to time reversals is to gauge suply and demand when price is in close proximity to support or resistance levels.
Again it is just my opinion but I think that studying the later would be the better investment of your time and $$$.
Good luck
Apsll.
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looks like someones finally making some sense.
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QUOTE (Apsll) Ben, I want to make it clear that I am only stating my opinion here.
I have done studies on moving averages of all kinds for many years and I must say that although I consider them great trend guides and have also noticed that certain moving average cross overs are relevant in certain market conditions I have not found them to be usefull when timing a reversal. Yes I have seen at times that price will respect the 200 day or the 50 day. But a far more reliable way to time reversals is to gauge suply and demand when price is in close proximity to support or resistance levels.
Again it is just my opinion but I think that studying the later would be the better investment of your time and $$$.
Good luck
Apsll.
Not scientific but I just did a quick eyeball of the first 50 stocks I came to in random order of the Nasdaq 100. I found that in 30 out of that 50 (60%) that blatant support or resistance was easily seen at the 50-day ema and/or 200-day ema in just the past six months. A quick seven random examples from that group:
CELG: 50-day resistance April and May, now support after testing early this week.
ESRX: 200-day support on four tests April and May.
EXPE: 200-day resistance in April.
HSIC: 200-day support May and June.
XRAY: 50-day acting as support April, May, June.
ILMN: 50-day acting as support Jan, Feb, March, April, May, June.
LOGI: 200-day resistance May, June. Now 50-day support.
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Again I only give you my observations of years of study. Do with it what you will. Yes at times these conditions will arise and may be of some help but in most cases I have found not.
In case you do want to pursue this however than just sort price compared to a moving average and choose the "Net difference". Look for values close to zero.
Good luck.
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Joined: 7/1/2008
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Thanks guys for the input. For me, the 20ema is what I use the most, along with the 50sma secondarily. Anything in a decent uptrend will hold the 20ema, incuding the broad market. Just only in the past couple days has the SPX violated the 20ema...this is the first sign of trouble since the rally began.
I really regret not buying FUQI yesterday on the bounce of the 20ema. Also, look at how well BIDU has respected the 20dma.
I see why they call it the Holy Grail...it's about as close to one as it gets!
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Joined: 1/12/2009
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How do you guys scan for stocks using Telechart? I notice a lot of you guys look for high volume breakouts/bounces. What PCFs or easy scans do you guys use?
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Joined: 11/11/2006
Posts: 359
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ben2k9:
In reference to the "Holy Grail", you may find it usefull to go to www.hardrightedge.com, in the "search" box, type in "Hojy Grail".
This will give you some of the newer findings for this set-up.
Of note, they feel that the absolute level of ADX is not as important as the direction. As long as it has bottomed and is rising, it is felt that the level of 30 is not critical.
In my humble opinion, if the rising ADX has crossed the falling -DMI, you have a tradeable uptrend.......
Mammon
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Joined: 12/31/2005
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fpetry present a potentially risk methd of confirmation.
Doing a "visual" random survey can be very convincing. The visual processing finds what it is looking for, the brains hunter mode kicks in. By looking for either 200 dma and/or 50 dma "lots" of eample will be seen. This doesn't provide solid actionable evidence, only interesting points to investigate. If you are looking to be convinced it works, you will be convinced. Wrongly, not often than not!
The question to investigate via backscanning would be what percentage of the time does a "bounce" succeed at generating a positive trade and what is the return of all trades.
The challenge is defining in realcode what "bounce" means.
Once done a backtest using a simple buy and hold for x bars, x being a small number will give a good reading of the potential. If the potential is there adding 1 or 2 more qualifiers could make for a viable approach worth developing exits, profit and stops.
The key point is one sees what one is looking for and even a 50-50 success rate on a visual inspection will seem like such a sure thing.
Test, test, and test some more before risking $.
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Joined: 7/1/2008
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that's a cool site mammon - thanks. never been there before.
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QUOTE (traderm30) How do you guys scan for stocks using Telechart? I notice a lot of you guys look for high volume breakouts/bounces. What PCFs or easy scans do you guys use?
traderm, your question is way too broad...you may need to start with the basics of stock scans...check out the "ask a trainer" topic and just read through the pages upon pages of scans & PCFs there. almost everything under the sun has been covered there.
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Registered User
Joined: 2/5/2006
Posts: 1,148
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QUOTE (ben2k9) For those that successfully play bounces off a moving average, what have you found to be the best approach?
- to buy as it touches the MA and hope for the bounce
- to buy the next day after it successfully holds
- to buy at some other point?
- something else?
try looking for a reversal pattern, with some underlying technical strength on the intraday charts. a moving average, in itself, is not a reason to take a position, only a place where a setup may (or may not) occur.
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this is very vague funnymony...do you have some examples to illustrate your point?
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Registered User
Joined: 2/5/2006
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QUOTE (ben2k9) this is very vague funnymony...do you have some examples to illustrate your point?
you know, when confirmed reversal patterns form at or near major moving average.
reversal patterns-like double bottoms, wedges, h & s, triangles, trendline breaks, etc.
sorry, no time to draw you a picture.
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QUOTE (funnymony) QUOTE (ben2k9) this is very vague funnymony...do you have some examples to illustrate your point?
you know, when confirmed reversal patterns form at or near major moving average.
reversal patterns-like double bottoms, wedges, h & s, triangles, trendline breaks, etc.
sorry, no time to draw you a picture.
just load up the last 10 days of spy using a 5 min bar, and you'll see plenty.
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Joined: 1/30/2009
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QUOTE (mammon)
ben2k9:
In reference to the "Holy Grail", you may find it usefull to go to www.hardrightedge.com, in the "search" box, type in "Hojy Grail".
This will give you some of the newer findings for this set-up.
Of note, they feel that the absolute level of ADX is not as important as the direction. As long as it has bottomed and is rising, it is felt that the level of 30 is not critical.
In my humble opinion, if the rising ADX has crossed the falling -DMI, you have a tradeable uptrend.......
Mammon
Wow, this is a great site. Looks like hours of fun here. Thanks for sharing.
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Registered User
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QUOTE (funnymony) QUOTE (ben2k9) this is very vague funnymony...do you have some examples to illustrate your point?
you know, when confirmed reversal patterns form at or near major moving average.
reversal patterns-like double bottoms, wedges, h & s, triangles, trendline breaks, etc.
sorry, no time to draw you a picture.
yep I see what you mean now...good point. I just upgraded to platinum and as a result am able to pay more attention to smaller time frames.
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Joined: 7/1/2008
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Here's a PCF for "close to the 20ema"
(C1 > XAVGC20.1 AND C < XAVGC15 AND C > XAVGC25) OR (L1 > XAVGL20.1 AND L < XAVGL15 AND L > XAVGL25)
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Registered User
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QUOTE (ben2k9) QUOTE (funnymony) QUOTE (ben2k9) this is very vague funnymony...do you have some examples to illustrate your point?
you know, when confirmed reversal patterns form at or near major moving average.
reversal patterns-like double bottoms, wedges, h & s, triangles, trendline breaks, etc.
sorry, no time to draw you a picture.
yep I see what you mean now...good point. I just upgraded to platinum and as a result am able to pay more attention to smaller time frames.
actually, i meant if you look at the spy in the last 20 days on a 10 min bar, you'll see quite a few reversals off trendlines and moving averages. theres a lot of action on the intraday charts. you see a lot of setups develop in a short period of time. very educational, if not profitable. i'm thinking of going back to platinum. i've been using scottrader.
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Joined: 1/28/2005
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Since we just had a strong rally I was curious how many times a
stock touches its average.
(would it just touch once and because of strength never touch again during the rally?)
Using the arbitrary condition:
(over the last 60 days)
Yesterdays low was under yesterdays 20epx mav.
Today's low was above today's 20epx average.
The 20 exp mav was higher than it was 5 days ago.
Over the last 60 days (before Thursday's 6/19/09 update).
The stocks in the NAZ 100 had hits 403 times.
Averaging 6.7 hits a day.
(or about 7% of the watchlist a day)
------------------------------------------------
Some Top hits:
SP500
KMB 11 times.
AKAM 10 times
----------------------------------------------
NAZ 100:
AKAM 10 times
CTSH 7 times
---------------------------------------------
SP600:
VICR 9 times
RSYS 9 times
MFB 9 times
-------------------------------------------
Watchlist of Country ETF's:
JSC 6 times
EWD 5 times
Thanks
diceman
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i wouldn't deny that price very often bounces off the major moving averages. the question would be how many of these bounces are actually tradeable.
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Joined: 12/2/2004
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QUOTE (funnymony) i wouldn't deny that price very often bounces off the major moving averages. the question would be how many of these bounces are actually tradeable.
How many are tradeable? Quite a few imo but let me put it in context, or at least how I play them. For me one of the main advantages for buying or selling/shorting when price makes a move at those averages is because the location on the chart often times offers a logical near-by price level to stop out for minimal loss should price move against me. But first of all before playing a moving average bounce on the long side for example I examine the previous few months of the chart and see how its price tends to react at those particular averages. And of course other factors have to line up, i.e. I never play a moving average reaction purely on that, I want other factors to compliment, such as maybe lateral support/resistance dovetailing with the bounce, uptrend intact or not, etc. Sorta like Mr. Worden stated when juding BOP on a chart...look at past history of the particular stock's chart and see how its price reacted to changes in BOP. Same with past moving average inflection points of a particular stock when sizing up whether or not to play a bounce.
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i agree, moving averages are very useful, when used in combination with other technical evidence.
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"the question would be how many of these bounces are actually tradeable."
Or maybe how many arent?
Well I look at it this way. I'm pretty sure
someone used breakouts over this period to make a profit.
Its hard to believe a pull-back would create more risk.
(since your buying cheaper)
The real key is the definition. If you notice 20 emas, 50 emas,
200 emas and intra-day have been discussed. As well as
timeframes and holding periods/stops.
Linda Raschke has used the 20 day for something like 30 years.
Would she say it was the best absolute level?
I think she would say: I can make a living off it.
You have to remember all knowledge is still there.
Its not like when you plot a 20 ema everything else disappears.
Its simply a guidepost.
Thanks
diceman
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regarding the pullback today: ouch
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QUOTE (ben2k9) regarding the pullback today: ouch
lol. not much of a bounce off the 50 day ma today.
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nope...plenty of MAs got sliced like a hot knife through butter today
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I wasn't going through a watchlist sort looking for bounces off the 50 ema per se when I came across gold miner stock NAK, but it was such a good example imo of the power of the 50-day average on some stocks that I had to show it here. And note how the 50 was clearly strong resistance Sept. thru Nov, and a few months prior not shown here in screenshot. Would I buy it here now? Maybe, but I do note that the previous 3 or 4 bounces off the average came rather fast after only about three days on average. This latest test is now 8 days old, maybe a sign of a little weakness setting in? Regardless, the chart is just a good example for paying attention to that particular moving average.
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