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| Moving averages generate predictive patterns as they flip and roll. Their complex crossovers mark key shifts in momentum and emerging S/R. But stick with the major averages when measuring the importance of a crossing event on the daily chart. Keep in mind that the 20-day MA marks the short-term trend, the 50-day MA the intermediate one and the 200-day MA the long-term nature of that market. Long time-scale crossovers take precedence over more frequent short-term events. When the 50-day MA pierces the 200-day in either direction, it marks a substantial shift in that market's psychology and buy-sell behavior. After a crossover, the 200-day should present a major barrier on any pullback. In an uptrend, price action will find support on dips to the 50-day MA in most cases. Just the opposite will likely occur in downtrends. When price gets trapped between the 50-day and 200-day, it can whipsaw repeatedly between the boundaries. This price conflict zone often generates good swing trades at the extremes. |
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