These Companies are in Serious Trouble

As I'm sure you know by now, I'm a technical trader. 

The reason that the technicals work is because they're a set of rules that people follow.

This is why you never see a 72-day moving average, who knows, that might be the most accurate moving average line - at least when you're testing for it (I have a friend that did exactly that and wondered why it didn't work).

But people don’t follow it.

Instead, we get things like the 20-day moving average (MA20) and more importantly, the 50-day moving average (MA50)...

That's what we're talking about right now - the MA50. 

It's what I like to call the traders' trend line and it tends to be the strongest line to look at when you trade like I do - with a 4-6 week outlook.

It'll allow you to identify the trend for a stock, get ahead of a rollover, and even time your trades.

It can be as simple as looking if it's trending up or down, but you can also apply rules such as knowing that if it's trending higher there's a ⅔ chance that it'll close higher that day, same for if it's trending lower.

Sometimes you can even see a full market pullback forming with it, for this, you need to use a tool that I refer to as the 'market breadth'

It's a chart that looks like this:

This tracks the percentage of companies trading above their MA50 - and that's the secret sauce.

You can see there's been a precipitous drop recently but this indicator tends to rush from one extreme to another, and there are a few laggards that are teetering on their MA50 and ready for a drop - I'll give you the list in just a moment.

But first, we are going to be focusing on this all week, so tomorrow I'll show you how you can use the names on the aforementioned list to formulate a trade - so watch your email for more info on that.

The post These Companies are in Serious Trouble appeared first on Penny Hawk.

About the Author

Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.

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