Near Both 50 and 200 Day - Stocks Trading Above 50 and Below The 200
The moving average indicator is traditionally used by technical analysts and traders to smooth out a stock’s price action, thereby helping clarify the market’s underlying trend. In addition, some traders use a strategy that involves watching for a stock’s price to trade in between the reading of its long term moving average, like the 200 day, and its medium term moving average, like the 50 day.
If the stock is trading above its 50 day moving average, which represents support, but below its 200 day average that provides resistance, the market often finds its near term price action caught between the medium term bulls and the long term bears. Typically, the result is a time frame when range trading prevails, as supply and demand factors vie to determine which side overcomes the other.
Range trading strategies used to take advantage of this situation could involve buying increasing amounts of the stock as it falls close to its lower 50 day moving average and then selling it back when the stock price rises close to its higher 200 day moving average, or vice versa. Stop orders could be strategically entered outside the moving average determined trading range to manage risk.
Many traders prefer to seek confirmation like buying activity showing up close to the 50 day moving average and selling activity emerging near the 200 day average. Also, signs of consolidation will often appear on momentum indicators like the Relative Strength Index or RSI as the market enters range trading conditions.
Following is an algorithmic scan of the stock market showing which stocks are presently trading just above their 50 day moving average and just below their 200 day moving average, and could therefore be suitable for implementing a range trading strategy.
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