|
|
|
|
|
|
|
Neal: Dick, you also have trend identifiers, right? |
|
|
|
|
|
|
|
|
Dick: Yes, I like to use moving averages. Moving averages are used to identify the direction and strength of a trend. The steeper the moving average line, the stronger the trend. |
|
|
|
|
|
|
|
|
Multiple moving averages can be used to identify entry and exit points. When the short-term moving average crosses the long-term moving average, it can be a sign that the general trend is changing. This is particularly useful when the crossing occurs in extremely high or extremely low territory, as seen in Figure 3-2. |
|
|
|
|
|
|
|
|
The moving average convergence divergence (MACD) expands on the multiple moving average idea. The difference of two exponential moving averages with different numbers of periods is charted, and then an exponential moving average of that line is overlaid and used as a signal for entry and exit points, as explained above (see Figure 3-3). Here, the MACD line crossed over the signal line in low territory and quickly began to pull away from it. A rally ensued, the end of which was signaled by the MACD crossing below the signal line during the first week in March. I wish to caution that moving averages can also be dif- |
|
|
|
|
|
