Using moving averages in analysis
Hi MM Team,
Long time subscriber but first time questioner! I wanted to ask what MM’s current purchase appetite is for: BHP (if it weren’t already in the portfolio), MFG, RIO and FMG (discussed in a previous newsletter but I’d be happy to read more). Just some quick thoughts to add context to my question: I have recently been doing a lot of charting study, and looking at the weekly and monthly charts alongside their respective daily charts. I set up my charts with 10, 20, 50 and 200 moving averages; often one will see a stock reach a high or low ‘in the middle of nowhere’ on a daily chart, however zooming out to the weekly chart often shows a different story for the stock price high or low in that support or resistance is found at the weekly moving averages. Further to that, when one examines the monthly chart, in many cases a major support point can be found at the 20, 50 or 200 month moving average.
Some recent examples are: MFG: found it’s ‘covid low’ support at its 50mth moving average, and after its recent decline looks like it might find support at its 200wk or 50mth moving average.
- BHP: Historically looks like the 20mth moving average has been a good guide for support, and in the next several days looks like the 20mth will be the major support level where the stock might turn around from there.
- FMG: back around Sep2018 the 50mth was the major support level before its massive run up where (at least on the monthly chart) the covid low looked like a minor hurdle. Today I am looking for a bounce from the 20mth moving average.
- RIO: Similar to BHP, met its covid low at the 50mth moving average and more recently is showing support at the 20mth moving average.
And for some indexes… the XJO’s 2008 financial crisis low found support at the 200mth moving average. NASDAQ’s covid low found support almost bang on the 50mth MA. I didn’t mean to write an essay but this has been a fascinating study for me and I hope others can learn from it.