Sunday, September 9, 2012

Stocks below their 200 DMA



Of all the technical indicators that traders follow, moving averages are the simplest. Among moving averages the 200 DMA is considered the most important. The closing of an instrument above or below its 200 DMA has major bullish or bearish implications.

Now the point here is simpler, don’t go long in stocks that are trading below their 200 DMA. Most of extraordinary falls have happened in stocks when they were trading below their 200 DMA. You would have avoided major falls in stocks like Satyam, GTL, GTL Infra, Suzlon and many more, had you exited from them when they closed below their 200 DMA.

Yes, sometimes we can find bargain stocks when they are trading below their 200 DMA but it is difficult to identify bargains when they stocks are trading at their lows. The basic and simple rule is: Buy stocks when they are in long term uptrend (price above 200 day MA) and not in downtrend.

(this post contributed by Jitender Yadav, edited by me)

5 comments:

Dinesh said...

Dear Sir,

I think the view here by Mr. Jitender Yadav coincides with your favorite line - new highs are bullish. This contradicts with what most of new traders think - the stock has already run a lot. But the view should be if it has already run a lot there is a high probability of going it further, at least from a short/immediate perspective. Therefore, go long.

Regards,
Dinesh

Birju Thakkar said...

Sirji, I m using moving avgs as my trigger for trading, please tell which tool u use as a trigger for going long or short in different mkt conditions(I m sure u must be using different tools for different mkt conditions) please give your views BirjuThakkar , Ahmedabad

Birju Thakkar said...

Sirji , I use moving avgs as my trigger for trading, what tools u r using for going long or short in different mkt conditions ( surely u use different tools for different mkt conditions).
Please give ur views on the trigger concept

BirjuThakkar

Birju Thakkar said...

Sirji, I use moving avgs as my trigger for trading. What tools u use for going long or short in different mkt conditions (surely u must be using different tools for ur trades according to mkt condition)
Please give ur views on tools to be used for opening a trade

BirjuThakkar

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