In Technical analysis, Moving average is one of the simplest and ideal to way to identify the trend. In most of the books of technical analysis, importance is given to 200 days moving average. For instance, if stock is trading above 200 days MA then trend is positive and vice versa. But, we differ from this stand as it is not all charts or asset class that follows the 200 days MA. Thus it is important to identify which moving average is suiting that particular stock. It is like when you go to the shop to buy cloths. Person will buy that cloth which suits him in size, color, etc. Same is the case with moving average as different stocks follow different averages. Below we have shown chart of Yes Bank taken from “The Financial Waves Short Term Update”.
Yes Bank weekly chart:
The concept of moving average is simple but it is not only for short term trading. It is also useful for medium term investments. Above we have shown chart of Yes Bank which has doubled now from the low made in the start of 2016. This stock is brilliantly following 5 weeks Exponential moving average. Not a single time prices have given close below 5 weeks EMA since the low made at 650 level in the start of 2016. Prices have maintained its uptrend irrespective of quarterly results or Global market volatility. Isn't it interesting?
Technical analysis is vast subject and therefore it is important to understand the different concepts and post that one should form trading or investment strategy. To know the in-depth research on Nifty and 3 stocks on daily basis, subscribe to “The Financial Waves Short Term Update” and for subscription visit Pricing Page