The Power of Moving Averages

Some people try to discount the usefulness of moving averages.

Few post back I showed a chart of GDXJ and how the 50 ma was acting as overhead resistance and that GDXJ needed to break through it to put in a solid move upward. The same principles apply in reverse. Here is a chart of MCD…Mac Donald’s has been in a solid bullish move. I got the sell signal couple days ago. MCD is core holding in my long term portfolio so I sold 10 shares to lock in some profit. Today MCD tap the 50 ma and turned right around. The 50 ma is acting as support for price.

Now look to the left hand side of the chart. Notice, the blue circles. MCD was in solid down trend at this time so the 50 ma acted as overhead resistance. The moving averages were in down trend slope 50,20,5….now MCD is in up trend and moving averages are sloping up and aligned 5,20,50. We have both slop and alignment. Is MCD run over? Who knows…it has stalled for now…and price bouncing off the 50 ma tells me buyers want to get in on this trend. If the 5 and 20 ma cross below the 50 ma and price prints below those aligned moving averages we will know we are now in bearish trend.

mcd117

I knew to add to my core MCD position where you see the blue arrow around $112. I took down some of the position in the $121 area as price stalled and the RSI went extreme as did the ADX/DMI and MACD indicator rolled over. Here your sign…..

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