Moving Average – 200-Day
The 200-day moving average is a popular, quantified, long-term trend indicator. Markets trading above the 200-day moving average tend to be in longer term uptrends. Markets trading below the 200-day moving average tend to be in longer term downtrends.
Wrote Larry Connors in his book, Short Term Trading Strategies That Work: A Quantified Guide to Trading Stocks and ETFs:
Many people like to buy stocks when they’ve been beaten down over a long period of time. You’ll see people “bottom-fishing” stocks as they are plunging lower under their 200-day moving average … Once a stock drops under its 200-day moving average, all bets are off. It’s better to be buying stocks in a longer term uptrend than in a longer term down trend …
Read the rest in Larry’s book, Short Term Trading Strategies That Work, available at TradingMarkets.com.