Let History Repeat Itself
Duke Heberlein is
on vacation. Michael Brooks wrote this article.Â
When following the “TradersWire
Applet,” you will often see stocks
coming across the wire that are touching or retouching their 20-day MA. The
analysts at TradingMarkets will then pick some of the best of this particular
group and post it to “Insights”. Below is an example from this
morning:
11:00:56
Coca-Cola Enterprises
(
CCE |
Quote |
Chart |
News |
PowerRating) is pulling back from its high. It tested
its 20-day moving average and now is trading positive to the upside. CCE
has a TradingMarkets.com
RS3 rating of 82 and an up trending ADX
of 41. CCE is trading at 22.03 up .62.
Take a look at the above chart. What makes the fact that CCE is
touching the 20-day MA significant? We have history on our side. Stocks
have individual personalities and once in a flow, they tend to stay in that flow
for some time. Notice how CCE has bounced at the 20-MA on four different occasions.
Today’s move followed the odds and CCE is up significantly on the
day.
Always keep this in mind when looking for a moving average bounce play. The
fact that a stock is approaching a MA means little by itself. However, if a
particular stock has had a reaction at that level in the past, then the odds
favor continued reactions.
Trading is nothing more than continually stacking the odds in your favor. Do
this routinely and you will be on your way to becoming a consistently profitable
trader.